II "Freefloin Bydget"
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BUDGETING OUR RES0URCES,1966-1975
TO ACHIEVE"FREEDOM FROM WANT"
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A TREEDOM BUDGET"
FOR ALL AMERICANS
Budgeting Our Resources, 1966-1975
To Achieve "Freedom From Want"
A. PHILIP RANDOLPH INSTITUTE
217 West 125 Street • New York, N- Y. 10027
OCTOBER, 1966
In the near future, I shaU call upoii the
leaders of the Freedom Movement to meet together
with economists and social scientists in order to
work out a specific and documented "Freedom
Budget/' I shall submit these recommendations
to the President , . ,"
A. Philip Eandolph
Honorary Chairman
White House Conference
"To Fulfill these Eights"
November 18, 1965
Introduction
The "Freedom Budget" spells out a specific and factual course of
action, step by step, to start in eariy 1967 toward the practical liquidadon
of poverty in the United States by 1975. The programs urged in the
"Freedom Budget'* attack all of the major causes of poverty — unemploy-
ment and underemployment; substandard pay; inadequate social insurance
and welfare payments to those who cannot or should not be employed;
bad housing; deficiencies in health services, education, and training; and
fiscal and monetary policies which tend to redistribute income regressively
rather than progressively. The "Freedom Budget" leaves no room for
discrimination in any form, because its programs are addressed to all who
need more opportunity and improved incomes and living standards —
not just to some of them.
The "Freedom Budget*' differs from previous worthy efforts to
set forth similar goals because it fuses general aspirations with quantita-
tive content, and imposes time schedules. It deals not only with where
we must gOj but also with how fast and in what proportions. It measures
costs against resources, and thus determines feasible priorities. It is not
only a call to action, but also a schedule for action.
The "Freedom Budget", however, is not self-executing. It defines
programs around which can be rallied all those individuals and groups
who favor these programs and their objectives. But even with this
convergence of forces, these individuals and groups will need to assume
the political task of impressing upon their Government the obligation to
undertake promptly the needed legislative and Executive programs. As is
stressed throughout, improved operations under the Employment Act of
1946, commencing at once, must be the first focal point of the implementa-
tion process. The "Freedom Budget" is thus an imperative call to national
action — now.
Why do we call this a "Freedom Budget?"
The language evokes the struggle of the civil rights movement, its
vision of social justice and equality, its militant determination that these
goals be rapidly and forthrightly achieved. This is the vision and deter-
minadon that underlies the "Freedom Budget'* and must propel any gen-
uine war on poverty. The moral issues in this war are no less compelling
than those of the battle against racism.
We call this a "Freedom Budget" in recognition that poverty and
deprivation, as surely as denial of the right to vote, are erosive of human
freedom and of democracy. In our affluent nation, even more than in the
rest of the world, economic misery breeds the most galhng discontent,
mocking and undermining faith in political and civil rights. Here in these
United States, where there can be no economic nor technological excuse
for it, poverty is not only a private tragedy but in a sense a public crime.
It is above all a challenge to our morality.
We call this a "Freedom Budget" because it embodies programs which
are essential to the Negro and other minority groups striving for dignity
and economic security in our society. But their legitimate aspirations can-
not be fulfilled in isolation. The abolition of poverty (almost three-quarters
of whose U.S. victims are white) can be accomplished only through action
which embraces the totality of the victims of poverty, neglect, and injustice.
Nor can the goals be won by segmental or ad hoc programs alone; there
is need for welding such programs into a unified and consistent program.
The main beneficiaries will be the poor themselves. But in the
process everyone will benefit, for poverty is not an isolated circumstance
affecting only those entrapped by it. It reflects— and affects — the per-
formance of our national economy, our rate of economic growth, our ability
to produce and consume, the condition of our cities, the levels of our social
services and needs, the very quahty of our lives. Materially as weU as
spiritually, a society afflicted by poverty deprives all of its citizens of
security and well-being.
In this war, too, we encounter the pessimists and the tokenists, those
who counsel "gradualism" and those who urge piecemeal and haphazard
remedies for deep-rooted and persistent evils. Here again, "gradualism"
becomes an excuse for not beginning or for beginning on a base too small
to support the task, and for not setting goals; and the scattered, fragmented
remedies, lacking priorities and coordination, often work at cross purposes.
In the economic and social realm, no less than in the political, justice
too long delayed is jusdce denied. We propose and insist that poverty in
America can and therefore must be abolished within ten years.
The means toward this end are spelled out in the following pages, pre-
pared in cooperation with some of the nation's outstanding experts. There
may be minor disagreements with regard to statistical data, analysis, and
policy proposals, even among those endorsing the ^'Freedom Budget'* in
this publication. These individuals subscribe only to the broad directions
of the ^'Freedom Budget," and are too imbued with a sense of urgency to
cavil about the details. But this limitation is not intended to imply luke-
wantmess in terms of urgency, nor to question that in its major aspects
the "Freedom Budget" is essentiaUy sound and imperative.
The "Freedom Budget*' contends that this nation has the resources
to abolish poverty, for the first time in human history, and to do so within
a decade. Indeed, the very process of abolishing poverty will add enor-
mously to our resources, raising the living standard of Americans at all
income levels. By serving our unmet social needs — in slum clearance and
housing, education and training, health, agriculture, natural resources and
regional development, social insurance and welfare programs — we can
achieve and sustain a full employment economy (itself the greatest single
force against poverty) and a higher rate of economic growth, while simul-
taneously tearing down the environment of poverty. All of these problems
interact, whether viewed as causes or results, and they are in truth both.
Only such a massive and sustained program — which sees poverty in
terms of the national economy, and not only in terms of the personal
characteristics of the poor — can bring success. Goals must be set,
along with timetables for achieving them. We must plan the allocation of
our resources in accord with our priorities as a nation and a people.
The economic impact of the war in Vietnam and the attendant ques-
tion of inflation are discussed subsequently and need not be taken up here,
except to point out that the "Freedom Budget" is not predicated on cut-
backs in national defense nor on one or another position regarding the
Vietnam conflict, which is basically a thorny question to be viewed in its
own terms. The fundamental proposition is that the broad approaches of
the "Freedom Budget" can and should be implemented, whether or not
an eariy termination of the Vietnam conflict is achieved, or even were
there to be substantial increase in its economic and financial burdens.
Qearly, however, there are those who would use the Vietnam war
and the issue of inflation as sharp weapons to force cut-backs or
dangerous slowdowns in the needed rate of expansion of domestic social
spending. Their cries might attract more notice bad they not, in too many
instances, been vociferous opponents of Great Society programs prior to
the stepped-up American involvement in Vietnam. And as for the prob-
lem of mflation, to the extent it augments, the Federal Government has
at its command selective measures to combat it which do not require im-
pairment of Great Society programs of needed magnitudes. If tiie progress
of mflationary pressures should indicate that we are trying to do more than
our rapidly-advancing productive resources will support, then a legitimate
effort against inflation means cut-backs of the relatively nonessential, not
of the vital. A simulated campaign against inflation which punishes those
who need help most reveals the crocodile tears of those who bewail how
inflation hurts the unfortunate. It is important that thinking Americans
recognize the selfish character of any assault on needed domestic programs.
As we reject these selfish pleas, so must we reject another argument
emanating from different quarters, to the effect that the termination of the
Vietnam conflict is the prerequisite for acceleration of domestic social pro-
grams. We all desire that termination, on safe and honorable terms; none-
theless, the argument just cited, no less than that of economic conserva-
tives, would hitch the aspirations and long-denied needs of the poor to
the outcome of the Vietnam war — a dependency which, we repeat, is
neither economically necessary nor morally defensible.
Those drafting this "Freedom Budget" have sought to outline, objec-
tively and fully, the steps required for the abolition of poverty in America.
It may be argued that the "Freedom Budget" is too ambitious to be "politi-
cally feasible." We contend that the proper question is whether the per-
sistence of poverty is any longer feasible. Can we lafford another Watts,
and what has happened since? How many examples of seething
discontent do we need before we move earnestly to provide jobs for all,
clear the slums, rebuild our cities, overcome the shortages of schools and
hospitals, and reverse the neglect of our other social needs?
Who, only a few short years ago, would have acknowledged the
"political feasibility" of the tremendous legislative victories of the civil
rights movement in our own day?
These breakthroughs were not won by those who thought narrowly
of what was "politically feasible/' but by those who placed the moral issues
squarely before the American people. Having stated the issues clearly,
they forged a mighty coalition among the civil rights and labor movements,
liberal and religious forces, students and intellectuals — the coalition
expressed in the historic 1963 March on Washington for Jobs and Freedom.
Social progress is always the trusteeship of those battlmg constantly
to lift the level of "political feasibility." A nation can decay, as all history
shows, if the level of "feasibility" is kept too far below what is required
to survive and advance. We must ask, not only what is feasible by whom,
but also what is needed by whom.
To the full goals of the 1963 March the "Freedom Budget" is dedi-
cated. Within this coalition of conscience the strength must be mobilized
for the implementation of this "Freedom Budget" for all Americans.
A. Philip Randolph
^O-v--^
^^xJ;:^
SIGNATORIES OF "FREEDOM BUDGET"*
The "Freedom Budget" embodies a fundamental approach to the elimina-
tion of poverty for all Americans, regardless of color, and has other essen-
tial purposes. While not necessarily endorsing every detail, I am in broad
agreement with its basic objectives and broad outlines,
I, W. Abel, President
United Steelworkers of America
Morris B. Abram, President
American Jewish Committee
Mathew Ahmakn, Executive Director
Catholic Conf. Interracial Justice
Arnold Aronson, Executive Director
Leadership Conference on Civil Rights
David T, Bazelon
Writer
Joseph A. Beirne, President
Communication Workers of America
Daniel Bell
Prof. Sociology, Columbia Univ.
Fay Bennett, Executive Director
National Sharecroppers Fund
Emile Benoit
Prof. Economics, Columbia Univ.
Irving Bluestone, Asst, to Pres,
United Auto Workers of America
Eli A. Bohnen, President
Rabbinical Assembly
Robert E. Bondy
Consultant
Richard W. Boone, Exec. Dir.
Citizens Crusade Against Poverty
William H. Booth, Exec. Director
N.Y.C. Commission on Human Rights
W. H. Bowe, iml, Sec.-Treas.
Bro. Sleeping Car Porters
Otis Brubaker, Research Director
Unit ed Steel Workers of America
Marion E. Bryant, National Pres. -J
Natl. Assn- Negro Business
issional Women's Clubs
Ralph Bunche, Undersecretary
Spec. Political Aifairs, U.N.
James MacGregor Burns
Prof. History, Williams College
Eugene S. Callender, Exec. Director
New York Urban League
Alan K. Campbell, Director
Metro. Studies Prog., Syracuse Univ.
Thomas C, Campbell, Dean
Commerce College, W. Va. Univ.
Stokley Carmichael, Chairman
Student Nonviolent Coord. Com.
Ethlyn Christensen
National Board, Y,W.C.A.
Kenneth B. Clark, Director
Northside Ctr. for Child Dev.
Richard A. Cloward
Prof. Sociology, Columbia Univ.
Charles Cooen, President
American Federation of Teachers
Eli S. Cohen, Executive Secretary
Natl. Comm. on Employment of Youth
Jack T. Conway, Executive Director
Industrial Union Dept., AFL-CIO
E. F. CoRBETT, President
Omega Psi Phi Fraternity
John C. Cort, President
National Cath. Social Action Conf.
Rev. John F. Cronin, S.S., Asst. Dir.
Dept. Social Action
National Catholic Welfare Conf.
David Danzig
Prof. Social Work. Columbia Univ.
Joseph E. Davis, President
Carver FesL-Sa^ings & Loan Assn.
Portia C. Bullock, President /J
NatL Association of College Women
* Where signatories are identified by "organization, this does not necessarily mean th^at
such organizations have endorsed the "Freedom Budget."
Rev. Thurston N. Davis, SJ.
Edilor-in-Chief, America
Ruby Dee
Actress
D. L. Dellums, Intl. Vice Pres.
Bro. Sleeping Car Porters
Lewis C. Dowdy, President
Agric. and Technical College of N.C.
'\) St. Clair Drake
y Prof. Sociology, Roosevelt Univ.
Albert R. DreisbacHj Jr., Assoc. Dir.
Episcopal Soc. Cult. & Racial Unity
Rev. Robert F. Drinan, S.J., Dean
Boston College Law Scliool
David Dubinsky, Former President
ILGWU; Vice Pres. AFL-CIO
"^ James R. Dumpson, Former C'missioner
New York City Dept. of Welfare
Leslie Dunbar, Exec. Director
Field Foundation
John K. Fairbank, Director
East Asia Res. Ctr., Harvard Univ.
Richard A. Falk
Prof. Jnil. Law, Princeton Univ.
Jules Feiffer
Syndicated Cartoonist
Paul Piiloaian, Editor
New America
Joseph H. Fichter
Professor, Harvard Divinity School
Harry Fleischman, Director
NatL Labor inst. Amer. Jewish Cmtee.
Augustine A. Flores, Past Chrm.
American G.L Forum
Alex Fuller, Director
Dept. Civil Rts,, United Steelworkers
John Kenneth Galbraith
Prof. Economics, Harvard Univ.
James J, Gallagher, Exec. Dir.
The John LaFarge Institute
Herbert J. Gans
Prof. Sociology, Columbia Univ.
William S. Gary
Civil Rights Department
Intl. Union of Electrical Workers
G. Gerena-Valentin, President
Cong. Puerto Rican Hometowns
Ray Gibbons, Executive Dir.
Council Christian Social Action
Robert W. Gilmore, Director
New York Friends Group, Inc.
WooDROw Ginsberg, Director Research
Industrial Union Dept., AFL-CIO
Harry Golden, Editor
The Carolina Israelite
Nathaniel Goldfinger, Director
Economics Dept., AFL-CIO
Rev. Quinland R. Gordon
Executive Council, Episcopal Church
F^ank Graham, Co-Chairman
Natl. Adv. Com. on Farm Labor
Rev, Dana Greeley, D.D., Pres.
Unitarian Universalist Association
Jack Greenberg, Director-Coqnsel
NAACP Legal Defense & Education Fund
Max Greenberg, President
Retail, Wholesale & Dept. Store Union
Bertram Gross
Prof. Political Sc., Syracuse Univ.
Matthew Guinan. President
Transport Workers Union of Arnerica
William Haber, Dean
College Lib, Arts, Michigan Univ.
C. J. Haggerty, President
Bldg. & Const. Trades Dept.» AFL-CIO
Paul Hall, President
Seafarers Intl. Union
aul J. Hallinan, Archbishop
atholic Archdiocese of Atlanta
Michael Harrington, Chairman
eague for Industrial Democracy
IEdler G. Hawkins, Past Moderator
resbyterian Church
Dorothy Height, NatL Pres.
National Council of Negro Women
Robert L. Heilbroner
Prof. Economics, New Sch. Soc. Res.
Ralph Helstein, President
United Packinghouse Workers
Vivian W. Henderson, President
Clark College
Nat Hentoff, Authoi
The New Equality
Stanley P. Herbert, Chairman
National Catholic Community Service
MsoR. George S. Higgins, Director
Natl. Catholic Welfare Conference
Norman Hill, Staff Representative
Indust. U-nion Dept,, AFL-CIO
Rabbi Richard G. Hirsch, Secretary
Relig- Action Ctr., Amer. Hebrew Cong.
John L. S. Holloman, Jr., M.D.
Chairman, National Medical Assn.
Irving L, Horowitz
Prof. Sociology, Washington Univ.
Rachelle Horowitz, Exec. Secretary
Workers Defense League
George M. Houser, Hxec. Director
American Committee on Africa
Irving Howe, Editor
Dissent Magazine
Mark DeW. Howe
Prof. Law, Harvard Law School
David R. Hunter, Exec. Director
Stern Family Fund
Homer A, Jack, Director
Dept. Soc. Resp., Unit. Universal. Assn.
Ruth J. Jackson, Chairman
Southern Beauty Congress
Rev. F. C. James, Director
Com. Soc, Act., Afr. Meth. Epls. Ch.
George James, Former Commissioner
N,Y.C. Dept. of Health
Thomas Miller Jenkins, Pres.
Albany State College
MoRDECAi Johnson, Former President
Howard University
Vernon E, Jordan, Jr., Director
Voter Educ. Proj., South. Reg. Cncl.
Mark L. Kahn, Chairman
Dept. Economies, Wayne State Univ.
Tom Kahn, Executive Director
League for Indust, Democracy
Leon H. Keyserling
Fjcon.; Pi-es. Coiif. Econ. Progress
Thomas Kilgore, Jr., Pastor
Second Baptist Church, Los Angeles
Martin Luther King, Jr., Pres.
South. Christian Leadership Conf .
Harry L, Kingman, Chairman
Citizens Lobby Freedom & Fair Play
Robert Lekachman
Prof. Economics, SL Univ. N. Y.
Rabbi Arthur J. Lelyvelo, Pres.
American Jewish Congress
W. N. Leonard
Prof. Economics, Hofstra Univ.
Earl Lewis, President ^
Harlem Neighborhood Assn.
Hylan Lewis -^
Manpr. Spec, Prof., Howard Univ.
John Lewis, Former Chairman
Student Nan-Violent Coor. Com.
Jimmy Little, Editor
New York Courier
Arthur J. Logan, M.D., Former Chrm.
Haryou-Act
Edwin J. Lukas, Director
Civil Rts.-Soc. Act., Amer. Jew. Com.
Floyd McKissick, Natl. Dir.
Congress of Racial Equality
B, F, McLaurin, Zone Supv,
Bro. Sleeping Car Porters
Cornelia E. McNamara, Natl. Dir.
Bks. forFqual Educ, U.S. Youth Cncl.
T. D. McNeal, Intl. Vice Pres.
Bro. Sleeping Car Porters
Albert E. Manely, President
Spelman College
Garth L. Mangum, Exec. Dir.
Upjohn Inst, for Employ. Research
Father Philip Marquard
Third Order St. Francis, Chicago
Burke Marshall, Vice-President
Intl. Bus. Machines Corporation
Will Mazlow, Executive Dir,
American Jewish Congress
Benjamin E. Mays, President
Morehouse College
Margaret Mealy, Exec. Dir.
Natl. Council Catholic Women
Saul H. Mendlovitz
Prof. Law, Rutgers Law School
o
Iasiah MiNKOFF» Secretary
Natl. Community Serv. Advisory Cncl,
Joseph Monserrat, Director
Puerto Rican Migration Division
Rt. Rev. Msgr. Gregory L. Mooney
Dir., Kennedy Community Center
John B. Morris, Executive Dir.
Epis, Society Cultural-Racial Unity
Dr. John Morsell, Asst. Dir.
. Natl, Assn. Advance. Colored People
Emanuel Muravchik, Natl. Dir.
Jewish Labor Committee
John Courtney Murray, S.J., Dir.
John LaFargc Institute
Pauli Murray
Professor of Law
GUNNAR MYRDAL
Instit. Intl. Econ. Studies
James M. Nabrit, II, Pres.
Howard University
Robert R. Nathan
Economist
Ben Neufield, Executive Sec.
Natl. Cncl. Agri. Life and Labor
Sarah H. Newman, Exec. Dir,
National Consumers League
Rev, David B, Nickerson, Dir.
Southern Field Service
Epis. Society Cultural-Racial Unity
Reinhold Niebuhr, Director
Christianity in Crisis
Eleanor H. Norton, Asst. Legal Dir.
American Civil Liberties Union
Frederick O'Neal, President
Actors Equity
L. Joseph Overton, Natl. Sec.
Negro American Labor Cncl,
Richard Parrish, Treasurer
Negro American Labor Cncl.
James G. Patton, Former President
NaiUonal Farmers Union
Harold L. Pilgrim, Exec. Sec.
Frontiers International
Albert Pinon, National Pres.
Community Service Organization
William Pollock, President
Textile Workers of America
C. B. Powell. Publisher
Amsterdam News
Dr. H, R. Primas, President
National Dental Association
Rabbi Joachim Prihz, Former Pres.
American Jewish Congress
Lee Rainwater
Prof. Econ., Washington Univ.
A. Philip Randolph, President
Bro. Sleeping Car Porters
Joseph L. Rauh, Jr., Vice-'Chrm.
lericans for Democratic Action
D. Reddick
7[ Prof. Hist., Coppin St. College
Kurt Reichert, Assoc. Prof.
Soc. Wrk.-Research. Bryn Mawr College
Walter P. Reuther, President
United Auto Workers of America
HoBsoN E. Reynolds
Grand Exhaulted Ruler
Improved Bene. Ord. Elks of the World
David Riesman
Prof. Sociology, Harvard Univ.
Frank Riessman
Prof. Education, New York Univ.
Cleveland Robinson, President
Negro American Labor Council
Joseph B. Robison, Director
Com, Law & Social Justice
American Jewish Congress
Bayard Rustin, Executive Director
A, Philip Randolph Institute
George P. Sabattie, President
United Transport Serv. Employees
Louis B. Schwartz
Prof. Law, Univ. Pennsylvania
Albert Shanker, President
United Federation of Teachers
Horace L. Sheffield
Intl. Rep., Citizenship Dept,, UAW
Leon Shull, National Director
Americans for Democratic Action
J. David Singer
Prof., Mental Health Res. Inst.
University Michigan
Don Slaiman, Director
Civil Rights Dept., AFL-CIO
John Slawson, Exec. Vice-Pres.
American Jewish Committee
AsHBY G. Smith, President
Natl. Allian. Postal & Fed. Employees
Robert W. Spike
Prof. Ministry, Univ. Chicago
Charles S. Spivey, Jr., Dean
Payne Theological Seminary
Benjamin Spock, M,D., NatL Chrm.
Committee for Sane Nuclear Policy
Rev. Austin J. Staley
Prof. Sociology. St. Vincent's Col,
Carl B. Stokes, Vice President
Urban League
Louis Stulberg, President
Intl. Ladies Garment Wkrs, Union
David Sullivan, President
Bldg- Serv. Employees Union
Rev. Leon Sullivan, Chairman
Community Indust. Ctr. Phila.
Mitchell Svirdoff, Director
N.Y.C. Dept. Human Resources
Norman Thomas, Chairman
Post World War Council
James E. Turner. Director
Dept. Fair Prac, United Rubbers Wkrs,
Gus Tyler, Assistant President
Intl. Ladies Garment Workers Union
Rev, James L. Vizzard, S.J., Dir.
Natl. Catholic Rural Life Conf.
Jbrry Voorhis, Executive Dir.
Cooperative League
Harry Wachtel, Exec. V. Pres.
American Foundation Nonviolence
Bishop Will J. Walls
African Methodist Epis. Zion Church
Michael Walzer
Prof. Political Sci., Harvard Univ.
Rowland Watts, President
Workers Defense League
Nat Weinberg, Director
Spec. Proj. & Econ. Analysis, UAW
Rabbi Jacob Weinstein, President
Central Conf. American Rabbis
Hunter P. Wharton, President
Intl. Union Operating Engineers
Katie E. Whickam, President
Natl, Beauty Culturists League
Elizabeth Wickenden
Social Welf. Consuhant
Natl. Social Welfare Assembly
Roy Wilkins, Executive Director
NatL Assn. Advance. Colored People
Robert E. Will
Prof. Economics, Carleton College
Pearl L. Willen, President
Natl. Council of Jewish Women
Robin Murphy Williams, Jr.
Prof. Sociology, Cornell Univ.
Gayraud S. Wilmore, Jr., Exec Dir,
United Presby. Com, Relig. & Race
William Wolpert, President
United Hebrew Trades
C. Vann Woodward
Prof. History, Yale Univ.
Jerry Wurf, President
Amer. Fed. St., Co. & Munic. Employees
Whitney M. Young, Jr,, Exec. Dir.
National Urban League
Charles S. Zimmerman
Natl. Trade Union Cncl.
Human Rights Jewish Labor
Contents
I. The "Freedom Budget" in Brief 1
Basic principles I
Basic objectives 2
The key role of our Federal Government 3
The "economic growth dividend" in the "Freedom Budget";
uses of this dividend ....„ ..;... 3
Responsibilities of the Federal Budget ,.,,.. 8
Specific full employment goals 10
Specific goals for liquidation of U. S. poverty 11
Specific goals for wiping out the slum ghettos 12
Investment in health services, education, and training 12
Lifting our welfare services to meet the need 13
Improving rural life - 13
How to contain inflation..... 14
The challenge, 1966-1975 15
XL Why We Need A "Freedom Budget" 16
Identity of our domestic and international purposes 16
The urgency of the challenge , 16
Budgeting our resources and needs 17
IIL The Role Of The American Negro In The "Freedom Budget" „ 19
The 'Treedom Budget" will benefit all 19
The "Freedom Budget" in relation to civil rights 19
IV. How Much We Can Do: The "Economic Growth Dividend" .... 21
The costs of high unemployment and low economic growth 21
"Economic growth dividend," 1966-1975 21
V. Budgeting The Great Priorities Of Our National Needs 23
The great priorities of the "Freedom Budget" in summary 23
The U.S. economic problem is a moral problem 24
VI. Sustained Full Employment: First "Means" Priority In
The "Freedom Budget" 25
Full employment vital: unemployment now .„,,, 25
The size of the full- employment task 28
Aggregate approach to full employment 28
Structural approach to full employment ..,,.. 30
Preparing an effective full-employment program 31
Contents (continued)
VII. Elimination Of V.S. Poverty: TTie First "End" Priority la
The "Freedom Budget"
TTie amount of U.S. poverty, and goals for its reduction
The related problem of deprivation
Importance of improved income distribution
Mam approaches to the reduction of poverty
;nie problem of "the working poor": minimum wage'le^dation'
The more generahzed wage problem Mauon.
VIII.
Replacing The Slum Ghettos: '^End" And "Means"
Priority In The "Freedom Budget'
How many are ill-housed, and why
Housing goals through 1975
Why is public housing called"unpopular"''
Impact of improved housing upon urban renewal
economic growth, and employment
Accompanying social benefits
IX.
Agriculture. Natural Resources, and Regional Development
The "farm problem"
Conservation and replenishment of naturai'resourcM
Regional development and the distressed areas...
X. Direct Investment In Hum^n Resources: Education, Training
And Health *"
Education
Training and retraining
Health services and research
XL
Social Insurance, Welfare, And Guaranteed Incomes
OASDHI and public assistance for the elderly
Other deficiencies in welfare programs
Unemployment insurance and workmen^s compensation
Toward a unified nationwide system of guaranteed
mcomes.
XIL Economic Feasibility Of The "Freedom Budget"'
The Role Of The Federal Budget .,
Proposed priority programs in the Federal Budget
Reasonableness of the Federal Budget projections
Tax implications of the proposed Federal Budget
AUowance for excessive optimism in the estimates..*,
XIII. The Moral Aspects Of The Problem Of Inflation
A balanced view of the inflationary danger.
The moral or social question...
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72
Charts
How Much We Have To Work With, 1965-1975. Based On
Economic Growth Projections 76
Number In U,S. Living In Poverty, Deprivation, Comfort, And
Affluence, 1964, And Goals For 1970 And 1975 , 77
The "Freedom Budget, 1970 And 1975 Goals For Employment,
Production, And Spending Projected From Levels In 1965 78
The "Freedom Budget," 1970 And 1975 Goals For Gains
In Incomes, Projected From Levels In 1965 79
Role Of The Federal Budget In The "Freedom Budget'
The "Freedom Budget" Maintains Balance Of Public And Private
Responsibilities ,.„
SO
81
Technical Note „„, 82
I The **Freedom Budget" In Brief
Basic principles
The "Freedom Budget" stems from seven basic principles:
( 1 ) Freedom on the American scene must include what Franklin D.
Roosevelt called "freedom from want.'* This can be achieved, not by the
power of any one group, but by the power of a fully-employed U.S. econ-
omy plus the power of th^ aroused conscience of the American people;
(2) "Freedom from want" for an increasing majority of our citizens
is not good enough; it must embrace all. Our economy is rich enough,
and should be just enough, to reject as intolerable the ghetto within stone's
throw of .the duplex apaiitment; the alien worlds of slums and suburbs;
■the unemployment rate four times as high in some localities as in the
nation at large; the millions receiving substandard wages despite many
thousands of millionaires; the low-income farmers despite luxury restau-
rants; the poverty among 34 million and the deprivation among another
28 million, in a land where median family income is now close to $7,000,
and where the families in the top income fifth have about eight times
as much income as the families in the lowest income fifth. We have
already received tragic warning that there is no prospect for domestic
tranquility in a nation divided between the affluent and the desperately
poor;
(3) The U. S. economy has the productive power to abolish "freedom
from want" by 1975, not by pulling down those at the top but by lifting
those at the bottom, if we start now and do our best. What we have the
power to do, we will in fact do, if we care enough about doing it. The
real issue is neither economic nor financial, but moral;
(4) Our economy is now too abundant for the poverty or deprivation
still afflicting almost a third of a nation to be explained mainly by the
personal characteristics of the victims. True, personal deficiencies have
a bearing upon the economic condition of many individuals. But it is
even more true that deficiencies in nationwide policies and programs,
evidencing a default in the national conscience, spawn and perpetuate these
personal deficiencies. Just as malaria has been stamped out more by
clearing swamps than by injectmg quinine, the main attack upon poverty
and deprivation must deal more with the nationwide environment than
with the individual. Beyond this, the modern technology has advanced to
the point where every American should enjoy "freedom from want,'*
regardless of personal characteristics;
(5) While "freedom from want" by 1975 will require action at all
levels, private and public, the leadership role must be taken by our
Federal Government. It alone represents all the people. Its policies
and programs exert the most powerful single influence upon economic
performance and social thinking. We accept this principle without ques-
tion during a total war against external enemies. A "war against
poverty" establishes the same principle on the domestic front;
(6) A war against want cannot be won with declarations of intent.
It cannot be won with token or inadequate programs which identify areas
of need, but apply policies and programs which only scratch the surface.
It demands specific quantitative goals, fully responsive to the need, and
commitment to their attainment;
(7) This war against want must be color blmd, Negroes wiU benefit
most relative to their numbers because, for reasons not of their making,
want is most heavily concentrated among them. But in absolute numbers,
the vast majority of those yearning for release from want are white. And
those already free from want, both white and nonwhite, cannot enjoy
fully the benefits of economic progress and the blessings of democracy
until "freedom from want" becomes universal throughout 'the land,
Basic objectives
Founded upon these principles, the seven basic objectives of -the
"Freedom Budget" are these:
( 1 ) To restore full employment as rapidly as possible^ and to main-
tain it thereafter, for all able and willing to work, and for all whom
adequate training and education would make able and willing. This
means an unemployment rate below 3 percent by early 1968, and prefer-
ably 2 percent. Full 40 percent of all U.S. poverty is due directly to
inadequate employment opportunity, and involuntary unemployment is
corrosive of the human spirit;
(2) To assure adequate incomes for those employed. About 20 per-
cent of all U.S. poverty is among the working poor (including their depend-
ents) who receive substandard wages. In addition, milli ons of farm
f-amilies and others in rural areas have substandard incomes. Treatment
of these problems depends primarily upon Federal legislation;
(3) To guarantee a minimum adequacy level of income to all those
who cannot or should not be gainfully employed. About 40 percent of
2
all U.S. poverty is among those who carmot or should not work because
of age or other disabUng factors. More than 13 percent of all U.S. poverty
is among families headed by women who should not work. Until, imder
Federal auspices, we achieve such a guaranteed income, there should be
immediate and vast improvements in all Social Security and welfare pro-
grams, with much larger Federal participation;
(4) To wipe out the slum ghettos, and provide a decent home for
every American family, within a decade. Foul housing is both cause and
consequence of poverty. It breeds resentment and unrest. Housing and
urban renewal, on a scale matching the need, would also make the largest
single contribution to job creation in the face of job displacement by
technological trends elsewhere in the economy. It would accent the
types of jobs most suitable for absorbing those now most vulnerable to
unemployment;
(5) To provide, for all Americans, modem medical care and educa-
tional opportunity up to the limits of their abilities and ambitions, at costs
within their means. The shortage of personnel and facilities upon enact-
ment of Medicare (which helps only the aged portion of the population)
speaks for itself. Many schools in our great cities are a shambles;
(6) To overcome other manifestations of neglect in the public sector,
by purifying our airs and waters, and bringing our transportation systems
and natural resource development into line with the needs of a growing
population and an expanding economy. This, too, would provide the types
of jobs most suited to reducing unemployment. Along with housing and
urban renewal, it would inmiensely improve the living conditions even of
those who already enjoy "freedom from want" in a more limited sense;
(7) To unite sustained full employment with sustained full produc-
tion and high economic growth. This is essential, in order that "freedom
from want" may be achieved, not by robbing Peter to pay Paul, but under
conditions which bring progress to all.
The key role of our Federal Govermnent
The "Freedom Budget" sets forth the above seven basic objectives in
specific and quantitative terms. It sets time schedules for their accomplish-
ment. It establishes their feasibility by means of a balance sheet of all of
our needs and resources, with due allowance for all of our other private
and public undertakings and aspirations as a nation and a people.
In this way, the "Freedom Budget" is a call to action. But
the response to this call must take the form of national programs and
policies, with the Federal Government exercising that leadership role
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which is consistent with our history, our institutions, and our needs.
six prime elements in this Federal responsibility are now set forth.
The
(1) Beginning with 1967, the President's Economic Reports should
embody the equivalent of a ^'Freedom Budget/' These Reports should
quantify ten-year goals for full employment and full production, for the
practical liquidation of U.S. poverty by 1975, for wiping out the slum
ghettos, and indeed for each of the seven basic objectives set forth in the
*'Freedom Budget." With due allowance for private and public per-
formance at other levels, but with a firm determination by our Federal
Government to close the gaps, all major Federal economic, financial, and
social policies — including the Federal Budget — should be geared to
attainment of these ten-year goals, starting at once in realistic magnitudes;
(2) The bedrock civilized responsibility rests with our Federal Gov-
ernment to guarantee sustained full employment. The Government should
at once and continuously lead in organizing -and financing enougji job-
creating activities to close the gap between full employment and employ-
ment provided at other public and private levels. None of these Federally-
created jobs need to be made-work, because our unmet needs in the public
sector are large enough to absorb beneficially this Federal effort. Train-
ing programs, to be effective, must be synchronized with job creation;
(3) The Federal Government should exert the full weight of its
authority toward immediate enactment of a Federal minimum wage of
$2.00 an hour, with coverage extended to the uppermost constitutional
limits of Federal power. This would be a moderate start toward eradica-
tion of substandard living standards among millions of those employed;
(4) A new farm program, with accent upon incomes rather than
prices, should focus upon parity of income for farmers and liquidation of
farm poverty by 1975. More than 43 percent of all farm families now live
in poverty, contrasted with only 13 percent of all nonfarm families;
(5) To lift out of poverty and also above deprivation those who
cannot or should not be employed, there should be a Federally-initiated
and supported guaranteed annual income, to supplement rather than to
supplant a sustained full-employment policy at decent pay. The anti-
poverty goal alone involves lifting almost all multiple-person families above
$3/130 by 1975.* Pending this, there should be immediate and vast
improvements in all Social Security and welfare programs, with greatly
enlarged Federal contributions to all of them, including old-age insurance
* Se<: chart on page 77.
income.
Money-income concept. About $4,000, including nonmoney
and assistance, general public assistance, special^urpose public assistance^
unemployment Insurance, and workmen's compensation;
(6) Fiscal and monetary policies should be readjusted to place far
more weight upon distributive justice. The massive Federal tax reductions
in recent years tended to redistribute income with undue concern for those
high up in the income structure, and inadequate concern for those lower
down. State and local taxes and indirect taxes are so regressive — they
bear with such excessive weight upon low-income people — that we should
make the Federal income tax much more progressive than now. The
decision to rely so heavily upon tax reduction and so littie upon increased
domestic spending to stimulate the economy was undesirable; it lowered
our capacity to serve some of tiie greatest priorities of our national
needs which depend upon public spending and are hardly helped by tax
reduction. The current monetary policy does little to curb the excesses
in the economy, and places a severe handicap upon activities of utmost
urgency, especially housing. The sharply rising interest rates help those
most who need help least, and hurt those most who need help most,
because it is the lower income people who depend most upon borrowing.
We cannot afford to neglect equity and social considerations in fiscal and
monetary policies which transfer billions of dollars every year from some
to others. Improved income distribution also helps the whole economy.
The "economic growth dividend" in the "Freedom Budget":
uses of this dividend
We cannot enjoy what we do not produce. The "Freedom Budget"
recognizes that all of the goals which it sets must be supported by the out-
put of the U.S. economy. This output should grow greatiy from year to
year, under policies designed to assure sustained maximum employment,
production, and purchasing power in accord with the objectives of the
Employment Act of 1946,
With such policies, our total national production (measured in 1964
dollars) should rise from about 663 billion in 1965 to 1,085-1,120 billion
by 1975, This would mean, for the ten years 1966-1975 -inclusive, a level
of total national production averaging annually 231.5-244.2 billion dollars
higher, and aggregating over the ten years 2,315-2,442 billion dollars
higjier, than if total production remained durmg these ten years at the
1965 rate. This aggregate ten-^year figure of 2,315-2,442 billion dollars is
the "economic growth dividend" upon which the "Freedom Budget'* draws
to fulfill its purposes,*
See chart on page 76.
The "Freedom Budget" does not contemplate that this "economic
growth dividend" be achieved by revolutionary nor even drastic changes in
■the division of responsibility between private enterprise and government
mider our free institutions. To illustrate, in 1965, 63.7 percent of our
totail national production was in the form of private consumer outlays, 16*5
percent in the form of private inv^tment, and 19.8 percent in the form of
public outlays at all levels for goods -and services. Under the "higher"
goals in the "Freedom Budget," .these relationships in 1975 would be 63,5
percent, 16.9 percent, and 19.6 percent.*
But while the "Freedom Budget*' will not be regarded as socialistic,
it is indeed socially-minded. It insists that we must make deliberate efforts
to assure that, through combined private and public efforts, a large enough
proportion of this *'economic growth dividend" shall be directed toward
the great priorities of our national needs: liquidation of private poverty,
restoration of our cities, abolition of the slum ghettos, improvement of
rural life, and removal of the glaring deficiencies in facilities and services
in "the public sector" of our economy. The "Freedom Budget" thus has
moral as well as materialistic purposes.
The use of only a fair and moderate portion of this "economic growth
dividend" to support the great priority purposes in the "Freedom Budget"
makes it clear that even those who are already affluent or wealthy would
not be penalized in any way in order to accomplish these great priority
purposes- Entirely to the contrary, they would continue to enjoy what they
have now, and also share largely and directly in the "economic growth
dividend" itself. They would also benefit indirectly in multiple ways by
the portions of the "economic growth dividend" used to support these great
national priorities.
A few examples will serve to prove the point that only fair and
moderate portions of the "economic growth dividend" would be used to
support these great national priorities. To cite one outstanding example,
based upon the deplorable condition in our cities and the slum ghettos and
rural slums, the "Freedom Budget" proposes that total private and public
investment in residential structures and related community improvements
(measured in 1964 dollars) average annually during the ten years 1966-
1975 about 53 billion dollars, or about 530 billion in the aggregate for the
teti years. On an average annual basis, this would be about 23 billion
dollars higher -than about 30 billion of such investment in 1965, and over
'the ten years it would aggregate about 230 billion dollars higher than if
* See chart on page 81.
such investmeut were maintained throughout these ten years at the 1965
rate. This 230 billion dollars would be less than one-tenth of the economic
growth dividend of 2,315-2,442 billion dollars. This is a very moderate
share of that "economic growth dividend" to apply to a program which
would come close to obliterating the slums and providing a decent home
for every American family by 1975, and would make the most powerful
single contribution toward the rescue of our cities and the creation of em-
ployment opportunity.
The portion of this investment in residential structures and related
community improvements which would be galvanized by the public sub-
sidies (at all levels) needed to rehouse those among the poor and deprived
who live in slums would average annually during the ten years 1966-1975
about 10 billion dollars, or about 100 billion dollars in the aggregate for
the ten years. On an average annual basis, this would be about 9 billion
higher than about one billion of such investment in 1965, and over the ten
years it would aggregate about 90 billion higher than if such investment
were maintained throughout the ten years at the 1965 rate. This 90 billion
dollars is in the neighborhood of one-twenty sixth of the "economic growth
dividend,"
To take another very significant example, the term "transfer pay-
ments" is used to describe those programs such as Social Security and
other welfare payments which are designed in the final analysis to transfer
a fair portion of the national income toward those who need help most.
The "Freedom Budget" proposes that these transfer payments average
annually during the ten years 1966-1975 close to 23.8 billion dollars higher
than the 1965 rate of 38.5 billion, or aggregate during the ten years about
238 billion higher than if the 1965 rate were maintained during these ten
years. This 238 billion dollars is only in the neighborhood of one-tenth of
the "economic growth dividend."
To take a third example, the *Treedom Budget" proposes a wide
variety of programs, private and public, which would come close to the
liquidation of U.S. poverty by 1975. In the final analysis, whatever means
may be adopted, .the liquidation of poverty depends primarily upon increas-
ing the incomes of those who are now poor. It has been estimated reliably
that the 34 million American poor would need to receive annually about
13 billion dollars more in income than they now receive to be lifted out
of the poverty cellar. In the aggregate during the ten years 1966-1975,
this would come to about 130 billion dollars. This 130 billion doUars is
only in the neighborhood of one-eighteenth of the "economic growth
dividend."
These three illustrations make it clear that the accomplishment of
these high priority goals, and the other priority goals set forth in the
"Freedom Budget,'* would involve so small a portion of the "economic
growth dividend" that there will be room and to spare despite these priority
programs for enormous progress for all. More than that, every program
designed to eliminate "freedom from want/' including home construction
and increasing the purchasing power of our senior citizens and of the poor
generally, will contribute to economic growth and enlarge opportunities for
private investment and profits.*
Responsibilities of the Federal Budget
While the "Freedom Budget" is based upon combined private and
public efforts, the Federal Budget is the most powerful single instrument
of national economic and social policy. It profoundly influences the
economic climate in which private enterprise operates. It speaks for the
needs and aspirations of all the people, and identifies our great national
priorities to a degree that they cannot elsewhere be identified.
The "Freedom Budget" proposes a Federal Budget which (measured
in 1964 dollars) should rise from 104.045 billion dollars (112.8 billion
in current dollars) as contained in the original fiscal 1967 Federal Budget
(which is several billion dollars too low) to 135 billion dollars m calendar
1970, and 155 ^billion in calendar 1975.
The proposals for national defense, space technology, and all inter-
national do not represent mdependent determinations in the "Freedom
Budget," but merely reflect the composite judgment of informed experts,
and make liberal allowances for increases now in prospect. All of the
other proposals are based upon determinations within the "Freedom
Budget" as to what part of our "economic growth dividend" should be
devoted to priorities which depend upon the Federal Budget,
Total proposed Federal outlays include a Federal contribution of one
billion dollars in 1970, and two billion in 1975, to help increase benefit
payments to the aged under the Old-Age, Survivors, Disability, and
Health Insurance program.
The foilowing table reveals the ^Treedom Budget" proposals for the
Federal Budget (measured in 1964 dollars).**
* See charts on pages 78 and 79.
** See chart on page 80.
1967
(Actual)
Total $ Per
Bil. $ Capita
Alf Federal Outlays 104.1 521.79
National Defense,
Space Technology,
All International 64.6 323.77
All Domestic Pro-
grams 39.5 198.04
Economic Opportu-
nity Program 1.5 7.39
Housing and Com-
munity Development 0.1 0.57
Agriculture and
Natural Resources 5.9 29,75
Education 2.6 13.10
Health Services and-
Research
Public Assistance;
Labor, Manpower,
and Other Welfare
Services 4,4 21,92
1970
1"975
Total $ Per Total $ Per
Bil. $ Capita Bil. $ Capita
135.0 645.93 155.0 685.84
77.5 370.82 87.5 387.17
57,5 275.12 67.5 298.67
3.0 14.36
3.4 16.03
0.5 50,24
7.0 33.49
4.0 17.70
3.8 16.81
12.0 53.10
9.5 42.04
3.3 1 6.74 4.8 22.97 7.0 3p.97
6.6 31.58
7.5 33.18
The above proposals for the Federal Budget will seem excessive only
to those who do not appreciate the growing productive power-s of the
U.S. economy, under conditions of sustained full employment and full
production.
For the ten years 1966-1975 inclusive, Federal outlays as proposed
in the "Freedom Budget" would average annually about 35.5 billion dollars
higher, and over the ten years aggregate about 355 billion dollars higher,
than if the Federal Budget remained stationary during these ten years at
its 1965 size of 98.7 billion (Calendar years, 1964 dollars). This 355
billion dollars would be only about one-seventh of the "economic growth
dividend."
Moreover^ when the outlays for national defense, space technology,
and all international are excluded from the proposed Federal Budget, the
"Freedom Budget" proposals for all domestic programs in the Federal
Budget would average annually only about 18.5 biUion dollars higher, and
over the ten years aggregate only about 1 85 billion dollars higher, than if
Federal Budget outlays for these domestic programs remained stationary
at their 1965 size of 37.7 billion. This 185 billion dollars would be only
about one-thirteenth of the "economic growth dividend."
Allowing for some proposed decreases in Budget outlays (e.g. lower
interest rates), about 8 percent of the "economic growth dividend" is ear-
marked by the "Freedom Budget" for increases, above the 1965 level, for
all programs in the Federal Budget addressed to the war against want.
This is modest indeed. It should also be noted that this about 8 percent,
or about 18.7 billion dollars on an annual average basis, comes to only
about 2 percent of the 894.2-906.9 billion dollars which our total national
product-ion should average annually, 1966-1975. What could better illus-
trate that die whole question of whether we "can afford" the "Freedom
Budget" is a moral question and not an economic issue?
The proposed Federal Budget would be only 15.38-15.51 percent of
total national production in calendar 1970, and only 13.84-14.29 percent
in calendar 1975, contrasted with an average of 16.16 percent during the
fiscal years 1954-1967. Thus, the size of the Federal Budget relative to
the size of the total economy would tend to declme somewhat. However,
Budget oudays for all domestic programs would rise from 5.65 percent of
total national production in 1954-1967 to 6.55-6.61 percent in 1970 and
6.03-6.22 percent in 1975.
In short, the Federal Budget as proposed in the "Freedom Budget"
would not at all distort our traditional concepts of the appropriate relation-
ships among Federal public outlays, publjc uullays at State and local levels,
and private outlays, ' It would not distort our traditional concepts of a
"mbced economy," based upon responsible free government and respon-
sible free enterprise. It would merely use the Federal Budget as a primary
instryment toward balanced economic growth and improved social
justice,*
Looked at even more broadly, the whole program set forth in the
"Freedom Budget" would not subtract from the income of anyone. It
would facilitate progress for practically all, but with accent upon the
dictates of the social conscience that those at the bottom of the heap should
make relatively the most progress.
Specific full employment goals
The first imperative step toward utilizing in full our productive
potentials is to restore full employment by early 196S at the latest, and to
* See chart on page 81.
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sustain it thereafter. This must take care of population growth. It must
deal not only with full-time and officially-recorded unemployment, but
also with the full-time equivalent of part-time unemployment and the
concealed unemployment which results from those who are not pardcipat-
ing in the labor force (and who therefore are not counted as unemployed)
because of scarcity of job opportunity. For example, in late 1966, full-
time unemployment of about 4 percent meant a true level of unemploy-
ment of about 514-6 percent, This means that, compared with 1965,
total employment (measured in its full-time equivalent) must be about
4.6 million higher in 1967, 9.3 million higher in 1970, and 16.6 million
higher in 1975. The total number of new jobs which must be created is
much greater, to allow also for those who will be displaced from old jabs
by technological changes,*
Specific goals for liquidation of U,S, poverty
Designating the benefits of sustained full employment and full produc-
tion as a means towards all other objectives, the first end priority in the
"Freedom Budget" is the practical liquidation of U.S. poverty. Moving
adequately toward this goal in every year beginning now, the poverty of
about 34 million people in 1964 can and therefore should be reduced to
only slightly more than 2 million in 1975, The rest of the goal can be
achieved shortly thereafter.**
The anti-poverty program, stemming from the Office of Economic
Opportunity, should bo improved qualitatively and greatly augmented
quantitatively. But at best, this program touches only one small aspect
of the poverty problem as a whole, which requires for its solution the
coordinated utilization of all major national economic policies. This is
true both with respect to a full-scale war against poverty in the form of
enlarging the private incomes of the poor, and a full-scale war again&t
poverty in the form of programs in the public sector.
Programs designed to improve income distribution are vital to the
liquidation of poverty. From the purely economic viewpoint, full resource
use cannot be sustained if the situation persists as it was in 1964, when
the highest income fifth of all U.S. multiple-person families received 41 per-
cent of total multiple-person family income, and the highest two-fifths
65 percent, while the lowest mcomc fifth received only 5 percent
and the lowest two-fifths only 17 percent, In terms of social justice, such
maldistribution is intolerable. Practically all major national economic
■" See chart on page 78.
** See chart on page 77.
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/
policies affect income distribution, and should be used to affect it progres-
sively, not regressively.
Specific goals for wiping out the slum ghettos
The most fundamental approach to "freedom from want" is guar-
anteed full employment, plus guaranteed annual incomes for those who
cannot be employed. But other efforts in the war against want are
essential.
The first of these is to wipe out the slum ghettos which are both the
roots and offshoots of poverty, while their replacement would also make
the largest single contribution to sustained full employment and the
rescue of the urban environment from deterioration and decay.
Traditionally-financed private housing for middle-income and high-
income families should average about 1.3 million b. year. But we should
start moving upward now toward about 400,000 starts of lower-middle
income housing in 1968, and about 500,000 in 1970 and on through 1975.
This calls for large increases in public outlays for land acquisition and some
other purposes, use of Federal loans or credit and other action to drive
interest rates downward, and a long-range planned program. Above all,
housing starts for low-income families, with annual subsidies to bridge the
difference between the annual cost of what these families can afford to pay
without excessive strains upon their overall budgets and what decent
housing costs, should be lifted year by year to at least 400,000 in 1968,
^nd 500,000 in 1970 and on through 1975, compared with less than one-
tenth this amount in most recent years. With about 21 million new homes,
1966-1975 (inclusive), almost all American families should enjoy decent
homes by 1975. Allowing for feasible increases in State and local
efforts, the basic thrust in this connection must come from Federal financial
assistance.
Investment in health services, educatiati, and training
Public responsibility, especially at the Federal level, must move imme-
diately and at an accelerating rate toward increased investment in our
human resources in the form of health services, education, and training.
Granted the advance represented by Medicare, we need approximately
to double within ten years the annual rate of outlays for hospital construc-
tion, and to increase at least 50 percent by 1975 the annual number of
physician graduates. Seriously inadequate medical care, due to the cost
factor, still handicaps about 40 percent of our population. The batde
should now be resumed for a nationwide system of health insurance,
12
For at least six years ahead, we need a construction program very
conservatively estimated at more than 100,000 public school classrooms
(with related facilities) a year, requiring outlays of about 27 billion dollars.
We need about 100,000 new teachers a year in the public schools. We
need vast enlargements in facihties and also in teachers at higher levels,
accompanied by public financial aid to hundreds of thousands of young
people who possess every innate endowment to go to college but lack
the means.
Many types of training programs, including vocational, should also be
expanded greatly. But we have learned from World War. II experience,
and experience during other periods of full employment, that the problem
of training is reduced to manageable proportions when job opportunities
-are not lacking. Moreover, a ten-year projection of the volume and
structure of full-employment requirements would show us better what to
train people for. Training them for jobs which do not materialize adds to
frustration and discontent.
Lifting our welfare services to meet the need
This summary cannot detail all of the deficiencies in the nationwide
medley of welfare services. Many of them are both inadequate and
degrading. They institutionalize poverty instead of fighting it. The
largest group of those dependent upon organized public payments are our
senior citizens. About two-thirds of them live in poverty, and receive
benefit payments (upon which most of them depend almost entirely for
their livelihoods) averaging somewhere between one-thurd and one-half
of the income required to lift them above poverty.
With large Federal contributions to offset in part the undesirable
features of payroll taxes which take away with one hand in order to give
with the other, the average old-age insurance benefits should be approxi-
mately doubled within five years. Other types of welfare payments should
be increased in similar manner. As already indicated, we should start
working now toward replacing this medley of inadequate efforts with a
more universal and unified system of guaranteed incomes for those who
cannot or should not be gainfully employed.
Improving rural life
The extraordinary concentration of poverty in rural America, the
economic disenfranchisement of a majority of our farm people, and the
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^
lag in public services in rural areas even relative to the gross deficiencies
in urban areas, call for both general and specialized approaches. Most
of these point ultimately -to Federal responsibility, both in the form of
a dra&ticEdly reconstructed national farm policy and Federal equalization
policies designed to help the poorer areas of the nation serve public needs-
Underemployment is rife in agriculture. Hired farm workers, especially
migratory, are among the most neglected and exploited people in America,
How to contain inflation
The "Freedom Budget" is not neglectful of the problem of inflation.
Its attainment would not generate the classical type of inflation which
results from attempting to do more than our productive resources can
support, because the "Freedom Budget" goals for economic growth are
based upon reasonably conservative estimates of the growth in the civilian
labor force and in productivity. The high degree of price stability 1961-
1965, compared with recurrent inflationary trends during 1953-1961,
indicates that an adequate rate of economic growth is more conducive to
price stability than an inadequate rate of economic growth punctuated by
recessions. The reappearance of considerable price inflation 1965-1966,
at a time when the real rate of economic growth was beginning to slow
down, and when idleness of manpower and other productive resources was
still too high, indicates in the main that the selective price inflation during
■this period was not due to excessive pressure upon our productive resources
but rather to business decisions to increase prices which were not justified
in view of very high profit levels. Indeed, some of these price increases
may have reflected the desire of some industries to "get while the getting
was good" in the face of some important signs of economic softening. The
remedy for this type of selective inflation is to take selective measures
to curb it, not to abandon the essential goal of adequate economic growth
and full employment and production.
But even if this analysis is not endrely correct, this would not negate
the urgency of achieving all of the great priority programs quantified
in the "Freedom Budget." It would simply mean that we should use tax
policy and other measures to restrain marginal enjoyments instead of
sacrificing what we need most. There is plenty of room in the U.S,
economy for social justice; and if the total productive powers of the
economy are hard-pressed, that is all the more reason to put first things
first. We did not starve munition production to fight inflation during
World War II; we should not dull the weapons in the war against want
if we need to fight inflation now.
14
The challenge, 1966-1975
If the ^'Freedom Budget" becomes the living law of our national
economic and social goals, policies, and programs, we can convert an
abundance which already exceeds the most fanciful expectations of a
decade ago into an America by 1975 where poverty has come close to
total abolidon; where every American enjoys a decent home in a suitable
living environment; where our cities have become places in which to live
instead of places to move out of as rapidly as possible; in which the
educational and health services enjoyed by all of the people will be abreast
of the advances in knowledge and science; in which the poisons will have
been extracted from our airs and waters; in which our natural resources
and means of transportation will be conserved and replenished; and in
which the incomes of all, while by no means equal, will be equal to the
requirements for living without want or economic fear, by virtue of
employment for those willing and able, and by other appropriate methods
for those not able to be employed.
Most important of all, we shall have recognized that the foundation
of a Great Society is a Just Society. The "Freedom Budget" does not
ask for the moon, but only for justice here on earth, m a land so well
able to •aS.ord it.
15
n. Why We Need A 'Treedom Budget"
Identity of our domestic and international purposes
The American people today are torn by two seemingly conflicting
purposes. On the one hand, they have been stirred to their depths by the
"war against poverty" and by other splendid goals of the Great Society.
They want to move forward toward these goals, and regard this properly
as an essential economic and social follow-through on recent progress to-
ward civil rights in racial relations. On the other hand, many of them
believe that we must slow down instead of speed up the practical pursuit
of these objectives, because of the war in Vietnam and the rising costs of
national defense and related activities. Current national policies and pro-
grams, in the main, embody this viewpoint. So long as this seeming conflict
is not resolved, we the American people remain divided among ourselves.
But this seeming conflict is not a real one. By common consent and
by every public proclamationj no effort we are making anywhere in the
world has any basis except to defend and advance the frontiers of freedom.
These frontiers are not measured by lines upon a map, but rather by the
ideals and human purposes we and other peoples live by. And the image
we project overseas is but the reflection of what we do at homCj in terms
of human progress and social justice. AH history teaches us, and never
was the lesson more manifest than in this second half of the 20th century,
that it would proflt a nation nothing to protect its shores but lose its souL
The urgency of the challenge
Our people feel in their hearts that the extirpation of poverty and depri-
vation, unemployment, and other injustice in the U.S, is central to all of
our efforts everywhere. But we have not marshalled the needed sense of
urgency, partly because freedom from want has become the general rule
rather than the exception in the U.S. But any complacency on this score
is a tragic and dangerous irony, because the very conditions which feed
this complacency bespeak our economic and insti-tutional power to bring
freedom from want and some measure of affluence to all of our citizens ~
commencing immediately, and reaching these goals within a decade. Then,
we will set new goals.
As an example of the current irony, even the Negroes in Watts today
may be better off in material terms than their counterparts of fifty years
ago, or very large segments of the American people during the depths of
16
the Great Depression thirty years ago. But the profound difference is that
the unemployment and poverty and deprivation of those earlier times was
merely a tragedy, because we had neither the economic resources nor the
know-how to deal with them. Today, because we have both the resources
and the know-how, the millions of unemployed, the 34 million living in
poverty, and the 28 million living above the poverty level but in depriva-
tion, nonetheless take on also the aspects of a national crime.*
The situation in Watts, and to a degree elsewhere, erupted in volcanic
form because the people there knew or felt that their deep troubles were
interlaced with manifest injustice. And this eruptive potential is seething
just below the surface in portions of almost every large city b the U.S.,
awaiting only some slight additional pressure or some unpredictable event
to spark the explosion. Because of the very nature of this situation, the
advances in general prosperity and employment are multiplying the funda-
mental pressures by the contrasts which they sharpen.
Budgeting our resources and needs
Responsive in part to these pressures, a growing sense of urgency may
more fully arouse the national conscience. But how fast this flame of con-
science succeeds in consuming the evils against which it protests depends
upon how boldly and quickly we translate it into massive program action.
If we continue to let the towering size of our troubles, and the costs of
overcoming them, lead to indecisiveness or faltering measures, then we will
indeed be letting our consciences make cowards of us all.
In view of the conflicting purposes referred to at the outset, goodwill
in itself will not be enough. It must be accompanied by awareness among
the American people of what we have the economic and financial strength
to accomplish. That is why we need a specific "Freedom Budget," measur-
ing our needs against our abilities to serve them. During World War II,
when we were engaged in a total struggle against external enemies, we
budgeted our total resources and needs. As no nation is ever strong
enough to do everything at once, we also established a clear set of priori-
ties, both civilian and military, added the ingredient of equity, and set
goals accordingly. We were then able to bring all policies and programs
* ThoSiB living in deprivation are above the poverty-income ceiling but without
sufficient income to prevent them from suffering serious denial of basic requirements.
In this discussion, the deprivation-income ceiling ($5,000 for a family) is lower than
the amount of income required for a "modest but adequate" budget ($6,000 for a
family). Contrasted with the 28 million living in deprivation, about 47 million
persons in families and unattached individuals in 1964 lived above poverty but
below the "modest but adequate" budget.
17
into focus toward accomplishment of these goals. And aside from the
draft of military manpower, we did this without impairment of volimtary
action, and actually strengthened our manifold institutions of freedom.
Because we did this during World War 11, we maintained full em-
ployment, and lifted living standards and reduced poverty more rapidly
than ever before, even while burning up half our production fighting
external enemies. If we now benefit by this lesson with appropriate
adaptions, what could we not accomplish in the few years ahead, as less
than one-tenth of our total production is now devoted to nadonal defense,
and as a muofa higher percentage is not anticipated?
m: The Role Of The American Negro
In The freedom Budget"
Tie "Freedom Budget" will benefit all
In one sense the American Negro, relative to his numbers, has an
unusually large stake in a "Freedom Budget" When unemployment is
excessive, the rate tends to be more than twice as high among Negroes as
others. Viewing U.S. multiple-person families in 1964, 37.3 percent of
the nonwhites lived in poverty with annual incomes under $3,000, con-
trasted with only 15.4 percent of the whites. About 14 percent of the non-
white families had incomes between $1,000 and $2,000, contrasted with
5.4 percent of the whites. And 7.7 percent of the nonwhite families had
mcomes below $1,000, contrasted with only 2.7 percent of the whites.
Among unattached individuals, 52.3 percent of the nonwhites lived in
poverty with annual incomes under $1,500, contrasted with 40.5 percent
of the whites; and 35.8 percent of the nonwhites were below $1,000, con-
trasted with 24.4 percent of the whites.*
Thus, the only reason why the Negro will benefit relatively more than
others from the liquidation of excess unemployment and poverty is not
because he is a Negro, but rather because he is at the bottom of the heap.
Aside from this dismal phenomenon, which is a liability rather than
an asset to the Negro, others will benefit far more in absolute numbers
through achievement of the goals of the "Freedom Budget." There are
far more unemployed among whites than among nonwhites. In 1964,
6.6 million white families and 4.2 miUion white unattached mdividuals
lived in poverty, contrasted with 1.8 million nonwhite families and
0.9 million nonwhite unattached individuals.**
The "Freedom Budget" in relation to civil rights
There is an absolute analogy between the crusade for civil rights and
liberties and the crusade which the "Freedom Budget" represents. This is
• The Office of Economic Opportunity, based upon the studies of MoHie
Orshansky^ now uses poverty -income ceilings of $3,130 and $1,540, respectively,
for multiple-person families and unattached individuals, but distributions by color
are not readily availaible on this basis. However, the distribution by color would
be roughly the same as indicated above. In the more extensive treatment of poverty
later on in the discussion, the O.E.O. poverty-income ceilings are used.
** As the nonwhite families Jiving in poverty averaged larger in size than the
white, ibeCween a third and a fourth of all persons living in poverty were nonwhite.
19
18
because the "Freedom Budget" would achieve the freedom from economic
want and oppression which is the necessary complement to freedom from
political and civil oppression. And just as the progress thus far made on
the front of civil rights and liberties has immeasurably strengthened the
entire American political democracy, so will the "Freedom Budget"
strengthen immeasurably our entire economic and social fabric.
The Negro's greatest role on both of these fronts is not as a bene-
ficiary, but rather as a galvanizing force. Out of his unique suffering, he
has gone a long way toward awakening the American conscience with
respect to civil rights and liberties. The debt which the whole nation owes
him will be increased many times, as he helps to win the battle against
unemployment and poverty and deprivation.
20
■ IV. How Much We Can Do:
The "Economic Growth Dividend"
The costs of high uaemployment and low economic growth
Before we kneel supinely before the false idol of what we "cannot
afford,'* we should appraise realistically the potentials of the U.S. economy.
A good startmg point is to consider how much we have forfeited by
the excessively high rate of unemployment and the low annual average
rate of economic growth since the end of the Korean war. From the be-
ginning of 1953 through the end of 1965, actual employment, measured
by man-years of work, was about 38 million below what it would have.
been if full employment had been sustained. The loss in total national
production, measured in 1964 dollars, is more difficult to estimate. But
responsible estimates of this loss range from 500 billion dollars to more
than 700 billion for the thirteen years as a whole, or an annual average
of from about 38 billion to about 54 billion. The significance of this loss
is indicated by the fact that the diiference between the actual annual in-
comes of the 34 million Americans now living in poverty and the annual
incomes required to lift all of them out of the poverty cellar would be
somewhere in the neighborhood of 13 billion dollars. The reduction of
poverty during these thirteen years was only a minor portion of what it
would have been with sustained full employment and production, accom-
panied by allocation of an appropriate portion of our total national pTO-
duction toward the reduction of poverty.
"Economic growth dividend," 1966-1975
Developments during the most recent years, when unemployment has
been reduced considerably and the rate of economic growth accelerated
greatly (even though we have not moved nearly far enough on either of
these two fronts), give reasonable assurance that we can make much better
progress m the years ahead, if we adopt suitable policies and programs.
The estimates of our economic growth potentials by competent orga-
nizations and individuals vary in degree, although they are usually within
similar broad ranges. These variations derive from differing emphases and
value judgments; within limits, the rate of economic growth depends upon
the exertions we are willing to undertake, the priorities to which we attach
most importance, and the policies and programs we adopt.
21
The "Freedom Budget" is based upon an average annual economic
growth rate of about 4!^ -5 percent from 1968 through 1975, and a
higher rate until full resource use is restored by early 1968 at the latest.
More specifically;
Our total population is estimated to rise from 194.6 million in 1965
to 224.6 million in 1975, a gain of more than 15 percent.
Taking account of the growth in the civilian labor force induced by
a full-employment environment, and if we commit ourselves to the restora-
tion of full employment by early 1968 at the latest and its maintenance
thereafter, total civilian employment should rise from 72.2 million in 1965
to 8S.8 million in 1975, a gain of about 23 percent.
It is much more diflBcult to make estimates as to future gains in
output per man-hour or productivity in the private economy, and the
competent estimates vary considerably. The competent estimates as to
the annual productivity-growth potential which have received the most
attention appear to range from 3 percent to 3.8 percent., For the purposes
of the "Freedom Budget," a range of from 3^ percent to about 3?4
percent is utilized. This does not seem excessive, as the average annual
rise in productivity in the private economy was about 3,6 percent between
1961-1965, and productivity trends in the future should be favorably
influenced by a fulUemployment environment, and by ever-improvmg
programs of training and education.
Combining these estimates of the growth in the civilian labor force
and the gains in productivity, and allowing for a gradual reduction hi the
length of the work week in accord with recent trends, it appears that,
measured in 1964 dollars, our total national production of goods and
services (GNP) should rise from almost 663 billion dollars m 1965 to
1,085-1,120 billion by 1975, or about 64-69 percent.
Movement toward a total national production which should be about
422-457 billion dollars higher in 1975 than it was in .1965 would mean
this: We would enjoy total national production averaging per year from
1966 through 1975 (inclusive) 231.5-244.2 billion dollars higher, and
aggregating during the ten-year period as a whole 2,315-2,442 billion
higher, than if total production remained at the 1965 level.*
It is perfectly plain that, if we use this "economic growth dividend"
well, we can meet all of the great priorities of our national needs, and
combine this with large additional progress for those at practically all
income levels.
* See chart on page 76. As to other estimates of our economic growth poten-
tials, and in order to appreciate that these other estimates do not significantly change
the basic impact of the "Freedom Budget," see Teclmical Note.
22
<V. Budgeting The Great Priorities
Of Our National Needs
Of course, we could not achieve the indicated gains in total national
production of goods and services without sustained full employment (from
early 1968 forward). But it might theoretically be possible (although
there is much doubt on this point) that we could achieve the indicated
gams m total employment and production without meeting some of the
great priorities of our national needs. We might conceivably make these
gains with millions slOl living in poverty while they worked to help lift
others from affluence to riches; and without rebuilding our cities, clearing
our slums, or concentrating upon the other goals of a Great Society. In
that event, we would become an example to all mankind of a land where
wealth accumulates and men decay.
The great priorities of the "Freedom Budget" in summary
The great priorities of our national needs may be stated very quickly
and simply. They are (1) to assure opportunity for year-round employment
to all of those able to work and wanting to work, including those whose
abilities need lifting through trainmg and education; (2) to obUterate what
might be called "private poverty," by assuring a decent American standard
of income and living — advancing as our economic capabilities grow — to
all those who are at work, and also to all those who cannot or should not
work for one vaHd reason or another; and (3) to eliminate the poverty in
the ^'public sector" of the American economy. This means remedying die
glaring deficiencies represented by decaying cities; obsolescent transporta-
tion systems; neglected natural resources; polluted airs and waters; rural
shortfalls even more glaring than those in urban areas; lack of adequate
educational opportunity for all, in accord with their ambitions and abilities
and the needs of an advancing technology; lack of satisfactory medical care
for all, at cos-ts within their means, compatible with the advances in medical
science; and outmoded social insurance and welfare payments, which do
not allocate a fair share of our national production and wealth to those
unable to enter into or remain within the production process because of age
or other condition of disabUity. It goes without saying that our great
national priorities relate also to national defense, space technology, and
international economic and technical assistance. These programs are also
allowed for amply in the *Treedom Budget," but they are in general beyond
the scope of this discussion.
23
We now face a curious paradox in general public thinking. Even
while there are those who question whether we can "afford" to meet
these great priorities of need, there are others who question where the
markets will come from to absorb our rapidly advancing productive
powers^ as the only alternative to massive unemployment. While we
should do all that we can to help those overseas whose poverty is
so extreme that it makes our poor families look affluent by comparison,
the greatest undeveloped market in the world for our own products is
among our 62 million citizens who are still poor or deprived, including the
opportunity to reshape the sordid physical environments in which they
and so many of the rest of us live.
The U.S. economic problem is a moral problem
Stated in another way, the so-called economic problem in the U.S, is
really a moral problem. Some of the underdeveloped countries of the
world, India for example, must temporarily hold down to a snail's pace the
rate at which they uicrease the living standards of their indescribably poor
populations. This is because they must bend every effort toward expediting
capital equipment and industrial development — their real source of hope
in the long-run. In vivid contrast in the United States, the immediate and
progressive fulfillment of our moral obligations to our people's welfare is
the surest method of promoting economic growth, capital accumulation,
investment in production facilities, and profits.
We may now turn to more specific consideration of our great priorities
of needs. We must remember always that we cannot serve these by glow-
ing declarations of intent; we must quantify the magnitudes of the various
needs, prove that we have the capabilities to meet them, and allocate suflfi-
cient portions of our great and growing resources to them. This, again, is
the essential meaning d the "Freedom Budget."
24
VT. Sustained Full Employment:
First "Means" Priority In The *Treedom Budget"
Sustained full employment is treated as the first "means" priority in
the "Freedom Budget/' because it is so highly relevant to attainment of all
of the other great priorities. For in the preponderance of cases, decent
living standards depend upon employment at decent pay. This is not to
deny that full employment is an imperative "end" in itself. There is
nothing more withering of the human spirit, and even of physical well-
being, than for one to be told "you arc not wanted" by the economic
society in which one lives.
But even aside from this "end" value of full employment, the preced-
ing depiction of how much we can expand our total production of goods,
and services in the decade ahead with full employment, and the subsequent
depiction of how much this full production would yield m terms of human
progress, make clear why full employment must be regarded as the top
"means" priority. We cannot use what we do not produce. The thesis that
mass unemployment would be tolerable (even assuming guaranteed in-
comes for all, including the unemployed) is defeatist beyond description.
ThuSj the "Freedom Budget" rejects all "explanations" or extenua-
tions of excessive unemployment, beyond the "frictional" minimum. It sets
out to budget and create enough jobs to restore full employment at the
earliest practical point in time, and to mamtain it thereafter.
Full employment vital: unemployment now
The prime reason why full employment is the first "means" priority is
that it is by far the most important single approach to the eradication of
poverty. This truth is hidden by stressing the wide numerical disparity
between the 34 million poor and a full-time unemployment rate of not far
from 4 percent or only about 3 million people, comprising with their
dependents perhaps fewer than 9 million people, in that many of the un-
employed are unattached individuals.
In the first place, the full-time unemployment rate now does not take
account of the full-time equivalent of part-time unemployment. Underem-
ployment is not consistent with full employment. Nor does it take account
of the concealed unemployment among those who are not in the civilian
25
I
"They've Been Going Together For Quite A While"
-from Straiffkt Merblock {Simon & Schustar, 1B64)
labor folce (and therefore not counted as unemployed) because scarcity of
job opportunity discourages them from looking actively for work, and
sends many of them instead into the poolrooms, the streets, and the knife
gangs. Unemployment should really be measured against all those of
working age who ought to be employed, not just against those actually
participating in the civilian labor force. Taking these factors into account,
the -true level of unemployment (contrasted with the full-time unemploy-
ment rate of about 4 percent) is somewhere between 5V4 and 6 percent,
or the equivalent of about 3%-4i/3 million full-time jobs. Translating
these breadwinners into their family equivalents, this comes to about
II14-I3 million people.
In the second place, the same people are not unemployed throughout
the year. In a year when the full-time unemployment rate averages 4 per-
cent, perhaps 12 percent of the labor force is unemployed for periods
averaging about three months within the year. The consequent loss of
income drags the majority of them below the poverty-mcome ceiling for
the year as a whole, if they were not there already even when fully em-
ployed, because of substandard wages.
Even allowing for the fact that not all of the unemployed and their
families are poor* it appears that about 40 percent of all the poverty in the
U.S. is directly attributable to full-time unemployment or part-time unem-
ployment, and that another 20 percent are poor because of substandard
wages paid to their breadwinners when employed (which in itself is an
aspect of an unsatisfactory employment environment). This accounts for
about 60 percent of all the U.S. poor, '
Moreover, the policies and programs designed to assure sustained full
employment would necessarily include enlar^ng greatly the purchasing
power of the other 40 percent of the U.S. poor who cannot or should not
be employed. This 40 percent includes almost all of the 27 percent or so
of the poor who are in consumer units headed by senior citizens (granted
that some of these senior citizens should be accorded employment oppor-
unity). It includes also the about 13 percent of the U.S. poor who are in
consumer units headed by women who cannot or should not work (almost
32 percent of the U.S. poor are in consumer units headed by women, but
much more than half of these women have or should have job opportuni-
ties). Thus, a full-blown employment program would encompass, in one
way or another, measures addressed to practically all of the poor, and not
just to those in the working-age population.
Further stilly sustained full employment would generate the public
revenues to finance the public programs which the poor (and others) need,
27
whether employed or not. To illustrate: If we had enjoyed full employment
and production during the period 1953-1965» tax revenues at all levels of
government — at actually existing tax rates — would have been about 200
billion dollars more than they actually were. With these additional tax
revenues, during the thirteen-year period, we could have built 175 thousand
school classrooms, and paid teachers one thousand dollars more each year
than they actually received; provided more than 500 thousand additional
hospital beds and facilities; increased Social Security payments very sub-
stantially by means of public contributions; paid for thirteen years the sub-
sidy contributions on 4 million units of low-rent housing; and used various
public types of mcome-supplementation payments to lift the incomes of all
of the poor families in the U.S. to an annual level for each of these thirteen
years averagmg $822 more than they actually received. (And there would
have been enough left over, from these additional revenues, to have in-
creased economic assistance overseas by about 50 percent, and to have
spent about 20 billion dollars more toward expansion of our national
defense efforts, if this had been deemed desirable.)
The size a£ the full-employment task
The size of the task of restoring and then mamtaining full employ-
ment is immense. Measured from a 1965 base, we need 4.6 million net
addi-tional jobs (full-time equivalent) by 1967, in order to restore full
employment by early 1968; 9.3 million by 1970; and 16.6 million by 1975.
Even these estimates understate the problem. They are based upon the
assumption that a level of full-time unemployment just below 3 percent of
the civilian labor torce would be consistent with full employment; we really
ought to be moving toward a target of 2Vi or 2 percent full-time unemploy-
ment, particularly because unemployment hits the "vulnerables" so much
harder than it hits the labor force as a whole, and the "ideal" toward which
we should strive is employment of everyone who should be participating
in the civilian labor force. And these estimates of net additions to jobs
do not include new jobs for those who will continue to be forced out of
their current jobs by technology and automation, and by changing patterns
of demand. Thus, it has been estimated tha-t we may need a gross total
of 22-27 million new jobs by 1975.
Aggregate approach to full employmenc
The aggregate approach to full employment insists that increases in
total spending or demands if large enough, will eliminate unemployment in
excess of "frictional" or minimum unemployment. These increases in total
spending may take the form of larger public outlays, without corresponding
2S
increases in taxation. They may take the form of tax reduction to induce
more private spendmg, without corresponding reduction in public spending.
In addition, increases in total spending may be promoted in the
private sector by reducing maladjustments in the distribution of income
which cause saving to rise faster than it is actually utilized for production
and employment purposes; idle manpower and plant are manifestations of
such excess saving. These needed corrections in the private sector may be
achieved through voluntary adjustments in prices, wages, profits, and in-
vestments, which would tmng into better balance our ability to produce
and our ability to consume. Adjustments in the private sector may also
result from public policies which impose private obligations, such as mini-
mum-wage legislation, various aspects of the Social Security program, and
some regulatory programs.
In very large measure, the aggregate approach to full employment
expresses an inescapable truth. Not a single unemployed person can get a
job anywhere (except by taking it away from somebody else), unless there
is additional spending to employ this person, even if there is a current job
opening waiting to be filled. This means more aggregate spending. And
since this additional spending adds to our total production of goods and
services, there is a clear and direct correlation between the reduction of
unemployment and the rate of economic growth. This rate must be
speeded up considerably to restore and maintain full employment.
While there can be no doubt that we need even better programs of
training and retraining than we now have, we must reject most emphatically
the proposition that the main reason for excessive unemployment resides
in the personal characteristics of the unemployed. This fallacy rests upon
failure to distinguish between the reasons why too many are unemployed
and the reason why particular people are selected for unemployment when
there are not enough jobs to go around*
If the current level of full-time unemployment were to rise from about
4 percent of the civilian labor force to 8 percent, due to insufficient
spending to hold unemployment steady, the additional unemployment
would be mainly among the "vulnerables." These would be the older
workers; the young people seeking to enter the labor force for the first
time; the semi-skilled and relatively unskilled; the nonwhites rather than
the whites, and the women rather tJhan the men, insofar as discrimination
against nonwhites and women remained, or because discrimination during
the past century and longer has prevented nonwhites and women on the
average from having the degree of training and education which others
29
have. But to say that this would be the reason why they became unem-
ployed would be like saymg that, if half of the people io a lifeboat died
from exposure because they were not as strong as the others in the boat,
the cause was the condition of their health rather than the shipwreck.
Likewise, if there were too few lifeboats, and the stronger k^ the
weaker out.
Conversely, the reduction of unemployment to only about one percent
of the civilian labor force durmg World War II provided jobs for those
who a few short years earlier were called "unfit," and also for millions who
customarily did not enter the labor force at all. And the creation of job
opportunities provides guidelines to eflfective training and education which
do not otherwise exist.
To state all this in a diilferent way, the fact that Negroes tend to be
the first fired and the last hired when jobs are insufficient should not pre-
vent us from recognizing that this phenomenon, so central to the racial
problem, would not exist if there were jobs for all. This, of course, does
not deny the need for anti-discrimination efforts; excessive unemployment
is no excuse for discrimination in the imposition of the evil«
Structural approach to full employment
The structural approach to full employment, as usually defincdj ex-
plains unemployment largely in terms of the "unfitness" of the unemployed,
and urges the training and retraining programs which would enable them to
M job openings which (it is claimed) already exist, or which (it is claimed)
would automatically result from better-prepared seekers for jobs. The
inadequacies of tills approach, if pushed too far, have just been set forth.
Yet the structural approach, within appropriate limitations^ has value
also. For the very meaning of the new technology and automation is that
a dollar of additional spending for one purpose will not help the job situa-
tion as much as a dollar of spending for another purpose. There are some
industries where the rate of output per man-hour will continue to rise faster
than any likely increase in demand for the products of these industries, no
matter how much money consumers have jingling in their pockets. For
example J using an index of 100 to represent the ratio of employment to
production in the base period 1947-1949, this ratio by 1964 had fallen
to 44.5 in agriculture; 57.3 in all manufacturing; 65.9 in iron and steel;
59.0 in electrical machinery and equipment; 57.8 in motor vehicles and
other transportation equipment; and 58.1 in railroads. And these trends,
in the main, will persist.
30
We therefore need to redirect an increasing portion of total demand
toward those goods and services where the increases in real national needs
from year to year are so -great that expansion of output to meet these needs
in full will outrun the rate of advance in technology and productivity, and
thus contribute millions of additional jobs. This will also provide a job-
produot-mix including a much higher proportion of semi-skilled and
relatively unskilled jobs; this is what large portions of the unemployed
need at once. It is futile to train people for job patterns of the past, which
we could not repeat if we would, and should not repeat if we could.
For even apart from technological consideration, and although almost
any kind of employment is better than unemployment, employment cannot
be tiie sole criterion. We do not want leaf-rakmg nor pyramid-building.
We cannot be satisfied with a million more jobs resulting from construction
of luxurious hotels on the beaches and from production of superfluous
gadgets by the hundreds of millions, if this substitutes for the additional
jobs which would result from creation of eflEective demand and markets fox
the things we need most as a nation and a people. This consideration unites
the goal of full employment with the goals for meeting the other priorities
of our national needs, especially the abolition of poverty.
Preparing an effective full-employmeiit program
As full employment depends upon a careful admixture of the aggre-
gate and structural approaches, much of the recent debate as to which of
the two should be emphasized has been academic and futile, and con-
ducted at the expense of the unemployed. There were similar debates
when we had 8 million unemployed just before World War 11. But when
the war came, we got down to busmess. We assumed tiiat we could
not afford any large wastage of manpower or other productive resource.
We budgeted full employment and full production, and we also defined tiie
priorities of our national needs and resolved to serve them. Guided by
these quantitative goals, we were able to achieve a marriage of public and
private policies and programs suited to the attainment of the goals. The
results outdistanced expectation.
Granted that less stringent policies and programs are needed now,
because we have more to work with and because we are not in a total war
against external enemies, a similar method is embodied in the "Freedom
Budget." But because the "Freedom Budget" is formulated without the
vast resources available to the Government, and because the "Freedom
Budget" has no powers except those of persuasion, the fulfillment of iu
31
objectives requires that the Federal GovemmeDt develop a more compre-
hensive and exact equivalent, whatever it might be called, and implement
it with all the powers at its command.
This is no more than the explicit mandate of the Employment Act
of 1946, which thus far has been seriously limited in its utilization. The
Reports of the President and of the Council of Economic Advisers under
the Employment Act should specify long-range goals, running five and
perhaps ten years ahead, for sustained maxunum employment, production,
and purchasing power. These goals should be divided into components
identifying what portions of out total output should serve the great
priorities of our national needs. There should be specific goals for the
total liquidation of U.S. poverty. There should be incorporated the con-
cept of a specific adequate standard of living for all Americans, assured
in the main by the commitment to sustained full employment, and supple-
mented by measures to guarantee this adequate standard of Uvmg to all
those who cannot earn it through gainful employment.
Every economic policy and program conducted by the Federal Gov-
ernment, or involving Federal legislation, should be geared (1) to
encourage others to go as far as they can toward attainment of all of the
goals, and (2) to an unqualified commitment, by the Federal Govern-
ment itself, to make up the difference between the full achievement of
■tfie goals and those portions of them which can elsewhere be achieved.
The Federal Budget, national monetary policies, social security and hous-
ing and farm policies, and all other national policies and programs
importantly affecting the development and utilization of our economic
resources, including our human resources, should be mcluded in ^e
equivalent of a "Freedom Budget" in the Reports under the Employment
Act, This should -be done fully in January 1967, and preparation should
commence now.
Every legitunate reliance should be placed upon the role of private
enterprise, community action, grass-roots participation, and action by
State and -local governments. But the very nature of a total effort against
unemployment and poverty and -all their manifestations, and toward serv-
ing the other great priorities of our national needs, calls for greatly
increased emphasis upon Federal action.
Here again there is a close analogy to the civil rights movement. This
movement started at the grass roots, and involved action at every level.
But it gained substantial ground only through leadership decisions made
in a Federal courthouse in Washington, a Federal Congress in Washington,
and the Executive Branch of the Federal Government. The need for
32
this is even, more apparent on the economic and social front. Theoretically,
the first objectives of the civil rights movement proper could be achieved
without Federal action, if the hearts and minds of 200 million Americans
were fully attuned to these objectives. But even if everyone wanted to get
rid of unemployment and poverty — and practically everyone does — the
specific acdons toward these ends cannot be formulated, nor fully executed,
by 200 million Americans in their separate and individual capacities. This
is what our national union and our Federal Government are for, and we
must act accordingly.
33
Vn, Elimination of U,S Poverty: The First
"End" Priority In The Treedom Budget"
In tenns of "end" objectives, the elimmation of poverty is ^the top
priority in the "Freedom Budget." For the very word "poverty" brings
together the whole cluster of our economic and social troubles: unemploy-
ment; substandard pay; bad housing; inadequate education and heal.th
care; mahiutrition; deficient Social Security and welfare payments to
those who cannot be gainfully employed; high concentration of crime,
juvenile delinquency, and o^er social aberrations.
The amount of U.S. poverty, and goals for its reduction
In 1964, 9.1 million multiple-person families, embracing about 29 mil-
lion people, lived in poverty. Adding 5.3 million unattached mdividuals,
the total came to more than 34 million. The amount of income required
to emerge from the poverty ceUar depends upon the size of the consumer
unit, the number of children in die unit and their age distribution, the
geographic location which to a degree affects the cost of Hving, and
some other factors. But as a fair working rule, a multiple-person family
income of $3,130, and an unattached individual income of $1,540, is cur-
rently used by -the Government and others as the poverty-income ceiling.*
Even ^ese data fail to present the whole picture. In 1964, 4.5 mil-
lion multiple-person families had incomes under $2,000, and 3.1 miUion
unattached individuals were below $1,000.
As has been stated, the goals for the reduction of poverty embodied
m -the "Freedom Budget" involve a top priority. They recognize the
necessity for policies and programs which are not satisfied with sustained
fuU employment and full production alone, and which concentrate upon
nmy specific measures to fight poverty. They involve substantial redis-
tnbutive efforts. Nonetheless, these goals for the reduction of poverty
are fitted mto an internally consistent range of "Freedom Budget" goals
which take account of all other basic economic requirements and national
objectives, contemplate balanced economic development, are designed for
optimum growth in our overaU economic strength, and (as wiU be shown)
envisage income progress at all levels of the income scale.
In this fuU perspective, the "Freedom Budget" contains estimates
* The money income concept is used throu^out this discussion.
34
I
Phot** — U81)A
*'. *
that the total number of American multiple-person families living in
poverty can and therefore should be reduced to less than three quarters
of a million by 1970, and to about half a million by 1975. The number
ot unattached mdividuals living in poverty can and therefore should be
reduced to about less than one and a third million by 1970, and to less
flian three quarters of a million by 1975. This means that, within
the decade ahead, we should reduce the total number of people livmg in
poverty from more than 34 million m 1964 to about two and a qumer
mtlhon m 1975.* The rest of the job should be done within a very few
years thereafter.
The related problem of deprivation
Studies of the U.S. Department of Labor, brought up to date for
changes m the cost of living, indicate that there is a very wide gap between
the poverty-income ceiling and the income required for a "modest but
adequate budget On the average, this budget might be set at about
$6,000 for a multiple-person family. It therefore appears conservative
to say that families with incomes under $5,000 (not $6,000) but above
the poverty-income ceiling of $3,130, live in deprivation, though not in
absolute poverty. Those living in deprivation in 1964 included about
7.5 miUion families, or about 26 miEion people.**
The "modest but adequate" budget for an unattached individual
averages about $3,000. and an individual with an income below $2,500
but above the poverty-income ceiling of $1,540, should be regarded as
hymg m depnvaton. These totaled 1.7 million in 1964. Adding these to
tlie about 26 million deprived people in multiple-person families, the total
cametoalmost 28 million people.***
In m^y ways the lot of those living m deprivation is especiaUy
poignant; their bread-wimiers in most mstances are fuUy employed, and
they are usuaUy regarded as "respectable" people without having .the
mcomes needed to live respectably.
rf.„ .^^.^""-^f« ^^^^^ "P°i poverty cannot neglect the problem of
deprivation. The sustained full employment and full production required
to hquidate po verty would be much more difficult to attam, if we <Md not
* See chart on page 77.
^^iZ^S^^^^^ ^^^'"^ - ^^^---- ^^ ^^^her than the average
36
also irtcrensc the incomes and purchasing power of thos& living in de-priva-
tion. The policies and programs most needed to increase '^e incomes of
the poor arc equally applicable to a majority of the deprived. And it
would be neither psychologically nor politically feasible to obtain the
public consents required for a full-scale war against poverty, if the
deprived were left out.
The "Freedom Budget" indicates that the 7.5 million families living
in deprivation in 1964 can and therefore should be reduced to about
3 million by 1975. It would seem that the number of unattached individ-
uals living in deprivation might actually increase from 1.7 million to about
2.8 million, but this would reflect the fact that so many of them now
living in poverty will have moved upward into the deprivation category.
Grouping together the families and the unattached individuals, the number
of people living in deprivation could and therefore should be reduced from
almost 28 million in 1964 to about 13 million in 1975.
These goals for the liquidation of poverty and the reduction of
deprivation are not incompatible with income progress all along the line.
For example, in 1964 there were 21.8 million multiple-person families
living in comfort or aiHuence with incomes of $7,000 or over; the number
could be lifted to iubout 42 million by 1975. Among unattached individ-
uals, there were 2.4 million living in comfort or affluence with incomes of
$5,000 or over; these could be lifted to 3.4 nullion by 1975.*
Importance of improved income distribution
The rather widespread idea that, if our economy grows rapidly
enough, poverty will be reduced at acceptable speed regardless of improved
income distribution, is entirely erroneous.
To be sure, sustained economic growth lifts the incomes of almost all.
But it doe.^ so far too slowly for the poor. And while poverty is in part
an absolute concept, it is also in part a relative concept. Poverty in the
U.S. today does not mean the same thing as 50 years ago, nor does it mean
the same thing as poverty in Africa or Asia today. Poverty in the U.S.
today is to some degree relative to what others in the U.S. now enjoy.
This does not mean that, if at some time in the distant future the lowest
income fifth had incomes averaging $20,000 a year, they would still be
regarded as living in poverty. But it does not mean that, regarding social
justice, we cannot remain satisfied with current income distribution when
the lowest fifth have incomes still so low in absolute terms*
i
* Again, see chart on page 77.
37
hi. 1964. the highest income fifth of all U.S. multiple-person families
received 41 percent of total multiple-person family personal income, while
the lowest income fifth received only 5 percent, and the lowest two-fifths
only 17 percent. It is arguable whether this distribution would be
acceptable in terms of the American ideal, even if the lowest income fifth
had 'average incomes of $20,000 a year. And it is certainly not acceptable,
when more than the lowest income sixth of our entire population live in
absolute poverty, and when almost all of the lowest third live in pover^
or deprivation.
Even from the purely "economic" point of ^dew, further improve-
ments in income distribution are essential to the adequate progress and
growth of the U,$. economy as a whole. From 1961 to 1965, total
national production measured in uniform dollars grew 22-5 percent, and
private consumer spending for ultimate products grew at about the same
rate. Government oudays at all levels for goods and services grew only
12.2 percent, and these also constitute a type of consumption of ultimate
products. Meanwhile, private investment in the plant and equipment
which add to our production capabilities advanced 45 percent. Such
uneven trends indicate the tendency of our power to produce to outrun
uldmate consumption, which results in idle manpower and plant, and,
if continued long enough, results in economic downturns.
These uneven trends in production capabilities and ultimate con-
sumption stem from uneven trends in incomes. From 1961 to 1965, wages
and salaries grew 21.8 percent, or at close to the same rate as total
private consumer spending, and farm proprietors' net income grew only
4.5 percent, while corporate profits grew 39.4 percent, personal dividend
income 33.6 percent, and personal interest income 42.2 percent.
Similar maladjustments between investment and consumption, profits
and consumer incomes, have been apparent during the most recent year, A
stable and growing economy remains in serious jeopardy until these malad-
justments are greatly reduced through improved income distribution.
Main approaches to the reduction of poverty
The aspect of the current "war against poverty" which centers in
the program of die Office of Economic Opportunity under the Economic
Opportunity Act of 1964 is of tremendous significance. This program
reflects the dedication of the President and the Congress to this war. It
has brought the problem of poverty to the center of the national stage. It
has enlisted the active cooperation of millions of men and women, in
almost every county in the U.S. where poverty exists. It has already
38
1
helped "to reveal the nature and scope of the poverty problem and in a
short time made measureable gains against some aspects of this problem.
The "Freedom Budget" projects very great enlargements in this program
from year to year, supported by adequate funds. The program has already
generated a wide variety of criticism, some constructive and some
unworthy. What is said below is not intended to deal with these criticisms,
nor to enlarge the burdens of the devoted people at all levels engaged in
the Economic Opportunity program.
But what has been already stated throughout this discussion, and
what will be said further below, make it clear that the major aspects of
a full-scale war against poverty cannot be found within the confines of
the Economic Opportunity Act. Nor are these aspects supported adequate-
ly by other national policies and programs.
This is because, to a very substantial degree, much of the current
thinking about the *'war against poverty" suffers from deficiencies quite
similar to much of the current thmking about remedies for unemployment.
There is a tendency to place excessive emphasis upon the personal charac-
teristics of the poor as the explanation of the huge amount of poverty in an
economy already as rich and productive as ours. There is correspondingly
a tendency not to recognize how predominant a part of the treatment of
the poverty problem depends upon full-employment policies, and income-
assistance policies for those who cannot or should not be gamfuUy
employed. Such policies are not generated by personal processing of the
poor. Indeed, without prompt development and application of such
policies, the "war against poverty" already threatens to generate resent-
ment and reaction, by lifting expectancies much more rapidly than they
arc being fulfilled.
This point is so vital that it requires reinfeDrcement by a detailed
examination of the characteristics of the U.S. poor. In 1964, somewhat
more than half of the poor were in consumer units whose heads had less
than eight years of education. Improved educational opportunity is in itself
a top national priority, and the "Freedom Budget" allows amply for this.
But those who have less than eight years of education are scattered among
many groups, including the aged, and in most instances improved edu-
cation would not in itself help much to lift them out of poverty.
For example, as already indicated^ considerably more than a quarter
of the poor live in consumer units with heads aged 65 and over. K we
are to deal realistically and promptly with this problem (instead of relying
upon the distant hope that the grandchildren of -today will not be poor
when they are grandparents, if sufficiently educated), we musl set about
39
promptly to enlarge the Social Security and welfare payments to our
abysmally neglected senior citizens — who will increase by many millions
within a few years.
More than one-eighth of all of the poor people in the U.S. live on
farms. Their plight, and what to do about it, is highlighted in Chapter
IX. Undoubtedly, farm people have had relatively less educational
opportunity than others. But this is not the reason why about 43 percent
of all farm families are poor, compared with only about 17 percent of
ail nonfarra families. The reason is that our national farm policies have
not succeeded in directing to agriculture anything even approximating
a fair share of national income, by compensating for the economic weak-
ness of the farmer who sells his products in a "free" market (where prices
fluctuate widely, responsible to the so-called law of supply and demand)
and buys in an administered or controlled market. Coupled with this, too
much of the Government aid has gone to farmers who have needed it
least, and too little to those who have needed it most. Another reason is
that we have not made full use of our farm productive powers to fight
malnutrition among millions of American poor children in nonfarm areas
and to fight starvation among hundreds of millions overseas, Still another
reason is that, in rural areas relatively even more than in urban areas, the
"public sector" is starved with respect to educational and health facilities
and personnel; this calls for "equalization" policies on the part of the
Federal Government. To wipe out farm poverty, the education most
needed applies to the policy-maker rather than to the farmer.
About two-fifths of all of the U.S, poor live in the South. But tJiis
poverty cannot be attacked by pointing out that its victims have the
personal characteristics of bemg Southerners, or by moving them to
Hariem. They are poor because their incomes are too low, and the lines
of attack are employment opportunity, decent wages, farm-income improve-
ment, larger Social Security and welfare payments, and better educational
and health services in the ^*public sector." These lines of attack are set
forth in more detail in later chapters.
Almost one-third of the U.S. poor, as already stated, are in consumer
units headed by women. Considerably more than half of these women
hold or should hold jobs; they would be helped most by a full-employ-
ment environment, and by removal of discrimination with respect to
hiring, pay, and advancement. Public financial support of an adequate
volume of day^care services for children is essential, in order that
more of these women may find it more feasible to take jobs and work
steadily. But more than one-eighth of the U.S. poor are in consumer units
40
hcadcd''by women who cannot or should not work. These families, con-
centrated most heavily among Negroes, arc singularly neglected in most
of the current inadequate efforts to make wur against poverty. They are
subjected to many types of pauperization and degradation in the very
process of extending to a small fraction of Ihcm the various types of
welfare payments, and even where these are extended they arc in most
cases woefully inadequate. This glaring aspect of the poverty problem
requires as one step a great enlargement of welfare payments in several
categories, both as to scope and size, and also development as rapidly as
feasible of a nationwide system of adequate family allowances. The quan-
titative needs with respect to these programs are set forth more fully in
Chapter Xr.
The point has already been developed that a full 40 percent of aU
of the poverty in the U.S. is due to inadequate employment opportunity;
to remedy this, training and education are an auxiliary approach to a
nationwide full-employment policy and program. And about 20 percent
of all the U.S. poor, as already indicated, are poor because their bread-
winners receive substandard wages when employed. This aspect of the
problem requires more extended treatment, which will follow shortly.
There is, of course, an appealing note in the concentration of the
Economic Opporlunily program upon the young. Insofar as this approach
is based upon recognition that millions of the young have become warped
and twisted by the poverty environmoni in which they have hved, it
deserves vigorous support. But insofar as this approach relates to improv-
ing their general education, it may be proper lo ask whether we should
not concentrate also upon improving our general educational systems, and
changing the environment in which these young people live so that they
will not drop out of school even if their classrooms are pleasant and
their teachers good. Insofar as this approach is based upon the training
of the young in a vocational sense^ the earlier-stated proposition applies —
that we need to know better what to train them for, and that in a fuU-
employment environment most of them would be drawn into jobs and
trained on the job.
And insofar as concentration upon the young carries any implication
that it is too late to do much about their elders, this misinterprets the
whole nature of the poverty problem. If we are addressing ourselves
to the more than 16 million poor children in the U.S., rather than to the
relatively few who may be involved for a short period of time in special
youth programs, we should all ask these pertinent questions: Can we
really rescue the young, without rescuing their parents? Can we really
41
rescue their parents, without profound alterations ia the whole environ-
ment in which they live — especially the employment environment and
the housing environment?
It is on the basis of these broad and balanced approaches that the
"Freedom Budget" presents all of the essential ingredients in a full-scale
war against poverty.
The problem of "the working poor":
minimum w^age legislation
We have noted that about one-fifth of all U.S. poverty is among those
whose breadwinners receive substandard wages. Prior to the 1966
amendments to the Federal Fair Labor Standards Act, only about 63 per-
cent of all nonsupervisory employees were covered by that Act and only
about 10 percent by State laws affording far less protection. Almost
IS million nonsupervisory workers were not covered at alj. The 1966
amendments increased coverage to about 80 percent of all nonsupervisory
employees, or slighdy more. This was a great gam, but it left about
10 percent* or more than 4,8 million nonsupervisory employees, not
covered by either Federal or State legislation.
These 1966 amendments also lifted the basic minimum wage to $1,40
as of February 1, 1967, and $1.60 as of February 1, 1968. As the $1.25
basic minimum wage took effect in late 1963, a lift to $1.60 an hour in
early 1968 would represent an average annual advance in real wages of only
about 3,8 percent, allowing for actual and estimated increases in the cost
of living. This is far too low a rate of advance for those at the bottom of
the wage scale. If a breadwinner enjoys 50 weeks of work per year and
40 hours of work per week, $1.60 an hour yields an annual income of
$3,200, which is only about 2.2 percent above the $3,130 poverty-income
ceiling for a family, and almost 47 percent below the $6,000 "modest but
adequate'* budget. Assuming IVi weeks of unemployment (to date a very
modest assumption for those working at this income level), the annual
income yield at $1.60 an hour is about 13.1 percent below the poverty-
income ceiling, and about 54.7 percent below the "modest but adequate"
budget.
Even at $2.00 an hour, the annual income yield is 33.3 percent below
the "modest but adequate" budget assuming full employment throughout
the year, and 43.3 percent below the "modest but adequate'* budget
assuming IV2 weeks of unemployment. The Federal minimum wage
should be lifted by steps to $2.00 an hour by 1968 or 1969, and its
coverage extended to the constitutional limits of Federal jurisdiction,
42
TKfe line of argument underlying objection to sufficient improvement
in the Fair Labor Standards Act, on the ground that this would be
"inflationary,' will be discussed when we come to the subject of inflation
and how to deal with it wisely and equitably.
The more generalised wage problem
The problem of inadequate wages is not limited to substandard wages.
Wages in general are the dominant factor in consumer purchasing power,
and the recurrent lag in consumer purchasing power behind the growth
in our production capabilities is a major explanation of excess unemploy-
ment and inadequate economic growth. The dangerously uneven trends
in various types of economic activity and incomes during the past four
years and during the past year have already been depicted, and recendy
have been tmderscored by the Council of Economic Advisers.
One cause of these uneven trends is that the Federal Price-Wage
Guideposts, while purporting to promote wage-rate gains in line with pro-
ductivity gains, have not had this effect. During recent years, wage-rate
gains have lagged very seriously behind productivity g-ains in the private
economy as a whole, and even more so in the manufacturing sector where
the hue and cry has been raised that excessive wage-rate increases have
forced prices upward.
Further unionization would also help to correct the wage lag, and
this would be assisted greatly by Federal legislation obliterating the so-
called "right to work" laws in some States.
43
Vm. Replacing The Slum Ghettos: "End" And
"Means" Priority In The "Freedom Budget"
The lemoval of the slum ghettos which now infect our citieSj and
of substandard housing in other areas as well, is the top specialized
priority in the "Freedom Budget," as distinguished from the broader
objectives of getting rid of excess unemployment and poverty. It is an
"end" priority because slum-living is an ultimate evil in itself, both a cause
and by-product of poverty, and perhaps the main factor in what has been
called the "self-perpetuating" nature of poverty. And it is a "means"
priority, because rapid expansion of home construction, with the other out-
lays which it would spark, can perhaps contribute about half of the 22-27
million new jobs we need by 1975.
How many are ill-housed, and why
Although there is no decisive single test of what constitutes
unsatisfactory housing, the 1960 Census described as "seriously deficient"
about 93 million housing units in the U.S., or about one-sixth of the total.
Allowing for what appears to be some understatement, at least one-fif& of
all our people were ill-housed when this Census was taken.
The bad housmg is occupied predominantly by the poor. According
to the Census, less than 21 percent of aU renter-occupied housing and
only about 7Vi percent of all owner-occupied housing in metropolitan
areas were unsound. But in the case of occupancy by families with
incomes under $3,000, about 60 percent of the former type of housing
and about 34 percent of the latter type were unsound. And among consumer
units with incomes under $2,000, it appears that at least 4 out of 5 lived
in unsound housing.
The poor in the main are not getting decent housing because it is not
"profitable'* to provide it for them. Even with the protection of Govern-
ment msurance through the Federal Housing Administration, far less than
one percent of the new single-family homes are purchased by those widi
incomes under $4,000. The production of new rental housing for the
poor on a "profitable" basis has been even more negligible. And the
provision of new housing for the higher income groups does not enable
decent housing to be "handed down" to the poor in any substantial volume.
The proof positive of this is the amount of substandard housing still in use,
and its highly unsatisfactory rate of reduction in recent years.
44
I'liotOH — T>.C. Hijiev-ulopjiHint Land Apciicy
Housing goals through 1975
It is going around in circles to argue that the poor should not move
into decent housing, except at the pace that they are able to pay for it on
their own by moving out of poverty. For the slums themselves make the
individual and the family less able to move forward on their own; and
without a vast rehousing program throughout the decade ahead, there
can hardly be the sustained fuH-employment environment which must
underpin the whole war against poverty.
In 1965, there were about 1.5 million traditionally financed private
nonf arm housing starts for middle-income and high-income families. There
were only about 40 thousand starts for low-income famUies and for lower-
middle income families combined. Measured against universally recog-
nized need^ this was a shocking misplacement of effort.
We should now determine to average annually during 1967-1975
about 2.2 million housing starts, as follows:
We should be starting annually about 1,3 million traditionally
financed private nonfarm housing for middle-income and high-income
families, compared with 1.5 million in 1965. ■ More than this is neither
desirable nor sustainable, because it recurrently saturates the market for
this kind of housing (as is now the case), and explains the extreme
instability of housing construction which has contributed mightily to
general economic instability and high unemployment.
We should start moving upward now toward 400 thousand starts of
lower-middle income housing in 1968, and about 500 thousand in 1970
and on through 1975, to help those in the "deprived'* income category.
This program requires an enterprising combination of private and public
efforts. It calls for large increases in public outlays for aid to land acquisi-
tion and other aspects of urban renewal. There is inoperative need for
powerful use of the credit of the Federal Government, either through loans
or guarantees, toward very much lower interest rates and much longer-term
loans. The Government should be making credit available for this type
of housing at an interest rate not higher than the average interest rate on
all outstanding Federal obligations.
Even this will not be good enough, if the Government does not
combat the trend toward rising interest rates of all types, instead of abetting
this trend by lifting the interest rates on its own obligations. The strategic
position of the Federal Government in the money markets, combined with
more effective public control of the Federal Reserve System, should be
used to drive all interest rates sharply downward. Chapter XUI details
why rising interest rates should not be used to fight inflation.
Nonfarm housing starts for low-income or poor families, with annual
subsidies to make up the difference between the annual cost and what these
families can afford to pay without excessive strains upon their total
budgets, should be lifted year by year to at least 400 thousand in 1968,
and 500 thousand in 1970-1975. Allowing for increased efforts by the
States and localities, the main drive ia this connection must come from
translating the Federally-assisted effort from a shabby token program to
meaningful proportions. The new "rent subsidy" program may well help
to provide more and better housing; for lower-middle income or "deprived"
families; it can hardly touch the housing problem of the poor.
The farm population also suffers from extremely bad housing. Al-
though this problem is most intimutcly connected with the general problem
of the restoration of our rural people to their proper place in the economic
structure (see Chapter IX), some note should be made of it at this point
The tragic condition of the housing supply for Negroes in farm areas
had only one limited example in the Mississippi delegation which set up
tent cities on Lafayette Square in Washington, D. C, to dramatize the
housing needs of sharecroppers throughout the rural South.
Why is public housing called "unpopular"?
The alleged "unpopularity" of the publicly-assisted programs to
rehouse slum dwellers arises luii from ihc fact that these programs have
gone too far, but rather from the I'lici that they have hardly made a dent. So
long as this kind of housing conliiuies to be built annually for less than one-
tenth of those who need il, nine families are excluded for every one that is
taken in, the rules of cxchisioii arc harsh and arbitrary, those taken in are
plagued with rules and rcgtiliitions, and driven out again when their incomes
rise enough to make thcni "deprived" instead Of poor. This very process
breeds resentment, turmoil, discrimination, and misunderstanding, and
tends to replace the old slum ghettos with new ghettos — mort liv-
able, to be sure. But when this housing effort rises to the challenge which
confronts it, it can become as successful and as "acceptable" as in some
other countries which have done so much more on this front with much
less resources to work with.
A sufficiently massive effort would substitute purpose for patchwork,
permit more mixed-income occupancy, make living in a "project" akin to
living in other satisfactory housing, and remove from the "projects" their
cruel identification as homes for the poor.
46
47
Indeed, the different financial methods required to rehouse people at
various income levels should increasingly be blended to provide projects
in which various income groups live, rather than different projects for
different income groups.
The housing program contained in the "Freedom Budget" would
reduce seriously deficient housing from 9.3 million units in 1960 to
3.5 million by 1970, including the effects of the new construction programs
and much more vigorous programs of rehabUitation. By 1975, practically
all Americans should be decently housed.
Impact of improved housing upon urban renewal,
ecoftomic growthj and employment
Al^ough our urban renewal efforts have been grossly inadequate to
date, they have run too far ahead of our efforts to replace the slum
ghettos with decent housing. While the destruction of slums has been
inadequate, the rehousing of slum dwellers has lagged even further. In
consequence, many slum dwellers have been crowded into other slums,
where they pay even higher rents because of the shortages thus created.
In a more commendable effort, massive projects to rehouse the poor should
be built first, and, after they move in, the slums they have left should be
torn down. Parks and throughways and shiny new office buildings are all
to be desired, but they do not get rid of the slums nor rescue those who live
in them. They may even breed resentments by the contrasts they create.
Flowers in the park do not remove the smell in the slums.
The replacement of the slum ghettos with now housing for their
occupants at an adequate pace would not only make other aspects of urban
renewal more acceptable, but also augment them greatly. Development of
community facilities and public improvements of all types would follow in
the wake of the needed housing effort. More would be spent for every
commodity which enters into housing and other urban construction, and
for furnishings and equipment within the structures.
An annual average of almost 700 thousand more housing starts dur-
ing 1966-1975 than in 1965, or 7 million more for the decade, coupled
with extensive rehabilitation and related community improvements, would
entail for the decade as a whole about 230 billion dollars more of direct
investment than would result from maintenance of the 1965 level of
housing and related activity. Considering the multiplier effects, the in-
creased spending due to this program over the decade might aggregate
450-560 billion dollars and create 45-65 miUion man-years of employment,
or 4y2-^y2 f^i^^^^^ ^^ ^^ average annual basis.
48
Photo — D.O* Redevelopment Land Agrency
This is a type of employment which would offer a product-mix of jobs at
various levels of skills — and this product-mix would offer far more
genuine hope> to those among whom unemployment remains mo&t con-
centrated, than training programs directed toward types of jobs which
cannot open up in nearly sufficient volume.
Accompanying social benefits
The social benefits would be equally significant, though less subject to
quantification. The crime, juvenile delinquency, and disease which concen-
trate in the slums would be reduced. Making our cities decent places in
which to live would reduce the outflow of the affluent to the suburbs. It
would at least slow down the process whereby we are now rapidly
becoming two Americas — with the poor forming increasing proportions of
those living in the cities, whUe others move out. And with the affluent and
influential forming a reasonable proportion of the total city population,
the cities would have both the means and the will to finance adequately
the popular services which are now being starved — with this starvation
aggravating the very poverty which it reflects.
50
IX. Agriculture, Natural Resources, And
Regional Development
The **farm problem'*
Our farm people and the farms on which they work are among our
most important resources. But these resources have been sorely neglected.
Millions of acres have been retired from production, despite widespread
malnutrition among the poor at home, and starvation among hundreds of
millions overseas. Millions of farmers have been forced off the land, to
find for the most part unemployment and poverty elsewhere. Even now,
on a family or per capita basis, the concentration of poverty is about
2\^ times as high in agriculture as in nonfarm areas. Despite improve-
ment in farm income during 1965, per capita farm income from all
sources in 1965 was only $1,610, and per capita income from farm
sources only $1,060, compared with per capita nonfarm income of $2,800.
A long-range full employment, production, and purchasing power
budget for agriculture is an essential part of the "Freedom Budget." The
main features are: (1) Goals to assure adequate, balanced, and pleasant
diets for the U.S. poor, without waitmg until they are no longer poor,
through expanded food stamp and other distributional programs; to meet
the growing food and fiber needs of our growing population in an economy
and industrial system expanding at optimum rates; and to enlarge vastly
our exports of foods and fibers to the half of the world where most of the
people go hungry. (2) Goals to maintain our farm population and farm-
land at levels which will assure the needed volume of output. Even allow-
ing for the uniquely rapid advance of technology and productivity in
agriculture, this will require a virtual stabilization of our farm population
durmg the next decade, plus large increases in acreage and livestock breed-
ing units. It will require that submarginal farmers receive the credit,
mcomes, tools, and skills to become self-sufficient, family-type farmers.
(3) Goals to eradicate farm poverty, and to bring farm families very close
to parity of incomes with others by 1975. This will require a gradual shift
from price supports to income supports, and determined eflforts to channel
the help to those who need it most instead of to those who need it least,
(4) Goals for improved public services in rural areas, where they are
even more deficient than elsewhere, with respect to education, health,
subsidized housing for those who need it, and Social Security and welfare
payments. This will require the reconstruction of all of these programs as
51
Photo— USDA
dealt with elsewhere in the discussion, and ever-increasing recognition that
the Federal Government must use its powers of spending and taxation as
an "equalizing" force. It is noteworthy that some of the States which
are spending least on a per capita basis for these public purposes are
spending most relative to their wealth and resources.
These goals for agriculture depend upon a complete reversal of recent
and current attitudes toward farm outlays in the Federal Budget, These
outlays have been pounded for many years, even from sources which
should know better, on the ground that they are "wasteful/* Certainly
the farm program, like most other programs, could be more efficiently
conducted. But most of the money expended under the farm program
has not consumed our economic resources; it has merely redistributed them
so that the farm population has received a larger share than it otherwise
would, even though a totally inadequate share. This has not only achieved
a portion of justice for the farm papulation, but it has also been immensely
beneficial to all the rest of us. It has protected the whole economy from
the catastrophic declines in farm incomes and prices which used to spark
general economic downturns of severe size with considerable regularity
throughout our history before World War II.
The help extended to the farm population by the nation at large
under national farm programs, constantly subjected to hue and cry on
the ground that it is "excessive,'* should be measured against the real
benefits conferred by the farm population upon others. Despite the talk
about rising food prices (for which the farm program is only in part
responsible because much of the rise at the consumer level is due to other
factors), die American people today are fed more bountifully than ever
before, and their food costs have come to occupy a constantly declining
portion of their total budgets. The farm population, which is providing
this service to the whole American public, for an income return coming
to little better than half of income parity with others, is really subsidizing
others, instead of others subsidizmg it>
Conservation and replenishment of natural resources
Resource development in the United States has far from kept up wth
the requirements of a rapidly-growing population, immense population
shifts, and industrial development. Critical shortages of water and power
persist in many highly populated areas. Air and waters remain polluted.
Recreation facilities are unavailable for those who need them most.
These quantitative and qualitative shortages are closely connected
with the whole problem of poverty and unemployment. Shortages of any
53
kind hurt the poor more than others. Recreational facilities will always
remain adequate for those who have the means to get there, and to pay
for what it costs to stay there. But recreational facilities accessible to
all remain seriously inadequate. The needed programs of resource con-
servation and replenishment would provide millions of jobs, and, as in
the case of housing and urban renewal, would have the additional merit
of a high product mix of relatively less-skilled jobs. And this is what is
most needed without delay for the majority of those among whom
umemployment is most heavily concentrated.
Our resource development programs should also intensify the indus-
trial development of atomic energy, with sufficient public controls to
make this energy the servant of the people, instead of a source of excessive
private gains.
The "Freedom Budget" includes a long-range budget on this front.
Regional development and the distressed areas
There are wide variations in the amount of poverty and unemploy-
ment from region to region. The most drastic and tragic aspects are to be
found in the so-called "distressed areas," Thus far^ the programs in
Appalachia and elsewhere are merely nibbling at the fringes of these
problems- Attempts to "solve" these problems by moving people from
the distressed areas to other areas, or by attracting industry and employ-
ment from other areas to these distressed areas, will merely shift the loca-
tion of the trouble until we have a sustained full-employment environment.
More important still, the specialized treatment of the "distressed
areas" must be massive and comprehensive enough to embrace full-scale
programs for economic development. It has been a generation since we
developed one TVA. With appropriate modifications, we need many of
them.
Above all, the plans for relief of the "distressed areas" and foi
regional development must be fused with a "Freedom Budget" of
nationwide scope and purpose. Without this, the public outlays essential
in the stricken areas will not receive the support of the American people
as a whole.
54
X. Direct Investment In Human Resources:
Education, Training, And Health
Nothing said earlier in this discussion should be construed as playing
down the role of personal improvement as a factor in economic and social
progress. The intent has been merely to appraise more carefully the extent
to which these specialized efforts bear upon problems of unemployment
and poverty. Moreover, valuing the individual above all else, we should
honor better education and training and health because they enlarge
the individual in all respects, rather than merely as aids to job opportunity
and more income. We would need more and more of these programs, even
if everyone were employed and affluent.
Education
For more than twenty years, the quantitative and qualitative shortages
of classrooms in our public schools have been accumulating. Instead of
remedying these adequately, we have tended to reduce the estimates of
shortages. We need, for at least sb: years ahead, and very conservatively
stated, a construction program of more than a hundred thousand public
classrooms a year. This would require outlays of about 27 billion dollars.
AUied with this, we need during the next six years about a hundred
thousand new teachers per year in the public schools, allowing for retire-
ments and other withdrawals, the current shortages, and population growth.
It is estunated that not more than two-thirds of this need will be filled,
without improved teacher-preparation programs and much higher pay.
With respect to higher levels of education, it has been estunated that
there are now at least 200,000 young people who are ready for coUege
but lack the means; the figure is probably much higher, and this problem
is acute among young Negroes. The number will increase, in consequence
of the very high birth rates during the early postwar years, and furliher
improvement in secondary education. Comparing 1975 with 1963, the
number of students who should be enroUed in schools of higher learning
should approximately double. Under existing programs, neither the facili-
ties nor the personnel will be available to meet these needs.
With -the States and localities straining their budgets, borrowing
capacities, and available sources of revenues, a very large share of
these needs must be met by the Federal Government, if they are to be met
55
at all. This has long been recognized by all in every way
in programs. Chapter XII is much more specific on this point.
except
Training and retraining
Tihe very commendable training and retraining programs for the poor
and deprived, and mostly the young, under the Economic Opportunity Act
are essential and should be greatly mcreased. This is also true of genepal
manpower efforts. But even when increased, they alone are not enough.
Handicapped workers need more attention. Vocational training needs to
be greatly expanded. Federal aid in the form of relocation allowances
should be instituted.
We need to draw a sharper distinction between education and train-
ing for preparation to enter the labor force, and education and training
to upgrade the existing labor force ^^ and do much more in both
categories.
The main advances in all of these areas must come, if they are to
come at all, through very great enlargement of public outlays in the
category of labor, manpower, and other welfare services. But as urged
throughout, these can be brought into clear focus only if used as
auxiliaries to programs which create jobs.
Health services and research
The recent enactment of Medicare, after years of struggle, evidences
recognition by the American people and their elected representatives that
medical care should be brought into line with the advance of medical
science, at costs which the recipients can afford to pay. But Medicare
touches only a small fraction of those within our population who cannot
obtain adequate medical oare at costs withm their means. Only one-third
of all families with incomes under $2,000 a year have had health insurance,
compared with three-fourths of all American families. About 60 percent
of the hospital patients in the lowest income groups have had none of their
bills paid by insurance, and this has run up to 72 percent in the case of
surgical patients. Although there is a direct correlation between low
incomes and practically all types of disease and mortality, the hospitaliza-
tion rates for nonwhites, where poverty is so highly concentrated, is
20 percent lower than for the population as a whole.
We s-hould approximately double within the next ten years the
annual rate of outlays for hospital construction, merely to keep pace with
population increases, to serve even the most essential requirements for
56
i
Photo— QeTtrude SamnelB, Tfte New T&rk Times
i.i;
replacement and modernization, and to provide indispensable facilities
for out-patient care. Even such efforts would do no better tlian cut in
half the severe current shortages by ten years from now. In addition to
hospital construction, there is need for expanding rehabilitation and out-
patient facilities. This should include diagnostic and treatment clinics;
facilities for long-term care; nursing homes, especially for the elderly; and
public health and mental health clinics.
The shortage of health personnel has by now become alarming. It is
estimated that, even to maintain the present very deficient ratios of health
personnel to population, the number of physician graduates must be
increased by 50 percent by 1975, and the number of dentist graduates
doubled. Programs now in evolution will not meet this need.
In the field of medical research^ the pending programs of the
National Institute of Health and other agencies, both public and private,
give promise of significant breakthroughs in scientific fields. But great
gaps still remain. The dollar-and-cents cost of those disabilities which
medical knowledge has not yet been able to prevent or reduce significantly
are staggering. Cancer disabihties alone cost nearly one-half billion dollars
per year m lost earnings, aside from the cost in lost production. The
human cost cannot be calculated.
All in all, seriously inadequate medical care now handicaps about
40 percent of our population — or far more than the numbers
who live in poverty or deprivation. The genuine answer is a nationwide,
universal system of healdi insurance. Experience with Medicare, and
enlarged medical facilities and personnel, would estakblish a stronger base
for this program- The battle for its enactment, abandoned many years ago,
should now be resumed.
58
XI. Social Insurance, Welfare,
And Guaranteed Incomes
Even in a full-employment environment, and with adequate pay for
those employed, there will be those who cannot or should not work.
Within this category, as already noted, we find those who, with their
dependents, come to about two-fifths of all the U.S. poor. Our economic
strength and our social conscience both dictate that we should allot to
these people a fair and decent share of om: total national product and
income. And increasingly, we should put these payments to those outside
the functioning economic system on a basis which moves toward the
guaranteed income concept as a matter of right. A steady and growing
flow of income to these people, rationally determined within the perspec-
tive of the "Freedom Budget,*' will also help to maintain economic growth
and a full-employment environment for others.
OASDHI and public assistance for the elderly
The original intent of the nationwide old-age insurance system,
established in 1935, was that within a generation or so our senior citizens
would receive, as a matter of right, payments adequate to mamtain an
American standard of living. But the improvements m this system from
time to time have not been fully responsive to our nationwide gains in
per capita income and wealth.
President Johnson has initiated substantial progress along this line.
The 1965 amendments to the Social Security Act extended benefit rights
to additional groups of people, and eased the requirements for entitlement.
The first impact of these changes was felt in September 1965, when both
the number of beneficiaries and the amount of benefits increased. The
title of the program was changed from OASDI to OASDHI, reflecting
the inclusion of contributions for health insurance for the aged, although
beneficiaries did not actually receive such benefits until July 1966.
As of late 1966, it has been estimated that, among those aged 65 and
over receiving OASDHI benefits, between two-fifths and three-fifths live in
poverty, taking into account their incomes from all sources. And millions
of them are not pressing against the poverty-income ceiling, but are from
25 to 50 percent below h. Even in March 1966, the average OASDHI
benefit to retired workers was only $84.14 a month, or at an annual rate
59
of only $1009.68. The annual rate of payment was less than $1,550 for
a retired couple, and slightly above $2991 for a four^person family
with a widow and three children.
In mid- 1966, more than 20 million -people received OASDHI
benefits, and there will be 10 million more within a few years. The
average size of diese benefits should be at least doubled within five years.
The complete reliance of this system upon payroll taxes is highly regressive,
and the building of "reserves" analogous to those in a private system has
no real merit in a public program. While it is too late to start afresh, a
larger portion of the sums required to lift the benefits under OASDHI
should be contributed by the Federal Government, and financed on an
annual basis through the progressive income tax.
While it was the original intent of the OASDHI system that the Public
Old-Age Assistance Program would gradually disappear, there remained
in March 1966 more than two million recipients of this assistance.
Among those aged 65 and over receiving Old-Age Assistance but not
receiving OASDHI benefits, about nine out of ten live in poverty. In
March 1966, the average old-age assistance monetary benefit was only
$62.72 a month, or $752.64 a year ($77.55 a month, including non-
monetary medical vendor payments). Average benefits varied enormously
by State, ranging from more than $95.36 a month in California to
$38.79 in Mississippi. Adding insult to injury, many of these old people
are forced to take the humiliating equivalent of a pauper's oath before
they qualify for assistance.
With greatly increased Federal aid, the same retirement and income
goals should be sought for our senior citizens helped by pensions as for
those helped by insurance, and for those who, for one reason or another,
receive neither. There is also room for very substantial improvement in
those aspects of aid to the elderly which deal not with old-age assistance
proper, but with other types of assistance including medical help.
Other deficiencies in welfare programs
The average size of public payments to the aged for medical assist-
ance varies tremendously from State to State. While the nationwide
monthly average in March 1966 was about $189, the average was only
$38.22 in Kentucky, $26.45 in Nevada, and $20.05 in West Virginia.
In March 1966, the average monthly aid in the form of payments
to the blind averaged $90.91, including nonmonetary payments. Mean-
while, State pubfic assistance payments to the permanently disabled and
60
Photo — liill Bridges
Used by special permlaflion ol Tha Saturday Evening Post
O 1963 V The CurtiB Publiahing Compiiny.
\
totally disabled averaged only $66.62 monthly in monetary terms, and only
$83.70 including nonmonetary vendor payments. Under OASDHI, the
average monthly payments to disabled workers, converted into their yearly
equivalent, would provide less than $1,644 for a family consisting of a
disabled worker and his wife, and less than $2,459 a year if there are also
two children. In many of the State laws, regulations and restrictions, relat-
ing to the required degree and proof of disability, work seriously against
effective help.
None of these data reflects the immensity of the neglect, because the
number of recipients represents only a small fraction of the total need.
Under State programs, all types of aid to families with dependent children
reach only about one million families.
In a broad sense, tiie concept of the general welfare extends to
practically all of the types of specialized public payments which have
thus far been depicted. In addition, help is extended to others, such as
needy families with dependent children. But in March 1966, this assist-
ance averaged only $35.45 monthly per recipient, which on an annual
basis would come to less than $1,276 for a family of three. And about
86 percent of the families receiving this type of aid receive no other type.
The States have developed a special category of payments in the
form of general assistance. The average monthly payments per case m
the general assistance categories was only $3L48 in March 1966. The
most glaring example of neglect in the whole field of welfare action has
been the enduring failure of tlie Federal Government to make any con-
tributions to State programs of general assistance.
Legislation to provide cash maternity benefits is virtually nonexistent
in this country. Yet ^ere are at least 15 million children, of whom 4 mil-
lion are under 6 years of age, and 5 miUion between 6 and 11 years of age,
who have mothers working outside the home. There are about half a
million fatherless families, with children under 6 years of age, whose
mothers are in ^e labor force.
Unemployment insurance and workmen's compensation
Many of the State unemployment insurance systems are miserably
inadequate, as to duration of benefits, size of benefits, and sufficiency of
available funds. With improved Federal standards and large Federal
contributions, we should move immediately toward makmg unemployment
insurance payments the right of all those unemployed through no fault
of their own, for as long as they are unemployed, and with an average
62
1
benefit payment at least half the average full-time working wage {or more
than (this, if that be required to square with the goal of a guaranteed
income at decency levels).
With increased Federal aid, disability coverage under pubBc assist-
ance and OASDHI should be as broad as the broadened coverage under
unemployment insurance, and disability payments should be lifted to
adequate standards as to amount and duration.
All of the States and the District of Columbia have workmen's
cotnpensation laws, but these are stiH very weak. In only about half the
States is the compensation compulsory; benefits in general are very low;
death benefits and duration of payments to widows are seriously limited;
payments for medical care and rehabilitation are very inadequate; and
operations in general are seriously impaired by a variety of undesirable
restrictions bearing upon eligibility. The time has come to utilize Federal
standards toward the needed improvements in workmen*s compensation,
which should be guided by the same considerations as those set forth in
connection with unemployment insurance.
In sober truth, the levels of our social welfare outlays in the aggregate
cannot stand up under any reasonable test. Expressed in uniform dollars
on a per capita basis, nationwide publicly financed social outlays have
advanced very slowly during the past fifteen years. Measured in ratio to
total national production, they have been virtually stationary since 1961.
The 1964 ratio of 7.7 percent (excluding outlays for education) was
appallingly low, in terms of our real priority needs.
Toward a unified nationwide system of guaranteed incomes
The guaranteed annual income is a highly desirable goal, designed to
assure a nationwide and universally guaranteed decency standard of
income for all those who legitimately cannot obtain it through their own
efEorts. It is based on the inescapable fact that an economy as rich and
powerful as ours cannot countenance widespread deprivation, much less
widespread poverty. One immediate need in this direction is greatly
increased Federal assistance in al! of the welfare categories; another is
Federal entry into the field of general public assistance. Beyond this, and
even more rniportant, there is need for gradual elimination of the whole
patchwork of ad hoc public assistance programs, which are highly ineffi-
cient and costly relative to their results and which tend toward pauperiza-
tion of recipients, and development of a guaranteed income on a nationwide
basis p
63
But this proposal for a guaranteed annual income becomes excessive
and unattainable when not founded upon recognition that it should be
supplementary to rather than in place oj a nationwide full-employment
policy which embraces both adequate earnings when employed and ade-
quate social insurance payments during such temporary periods of unem-
ployment as may occur. Indeed, it is even more important that the
Federal Government guarantee sustained full-employment than that it
guarantee incomes for all. To put this in a preferable way, a Federally
guaranteed full-employment policy should be at the very heart of a guar-
anteed-income policy. This Federal fuU^employment policy should under-
take forthrightly and immediately to provide jobs at adequate wages
(accompanied by adequate social insurance coverage) for all those who
should be participating in gainful employment, but who cannot be or are
not gainfully employed at other levels of private and public responsibility.
Practically any type of employment is better than unemployment on all
grounds. And our unmet national needs in the public sector, which
require massive Federal action if they are to be serviced, mean that this
type of employment would be of no less value in terms of goods and
services created than other types of employment, and of far more value
than a substantial part of current and prospective employment directed
toward the production of relatively less desirable goods and services.
64
XII. Economic Feasibility Of The 'Treedom
Budget": The Role Of The Federal Budget
Just as our Federal Government is the leadership agency for imple-
menting the "Freedom Budget/' so the Federal Budget is the main instru-
men-t of national economic policy. It identifies our national priority needs,
whether adequately or inadequately, and through expenditure and tax
programs directs resources in accord with this identification.
In recent years, the Federal Budget, has not responded adequately to
these great priorities of our national needs. Measured in ratio to total
national production, conventional Budget outlays were 17.7 percent in fiscal
1947, the first full year in an economic sense after World War II. By 1961,
they had dechned to 16.08 percent, and for fiscal 1967 are estimated at
15.05 percent.
The fact that the total Budget was too low to perform its function in
helping to maintain full employment and production means that domestic
outiays in the Federal Budget were too low if one assumes that outlays for
national defense were about right. Domestic outlays were certainly too
low, in terms of the great priorities of our domestic needs. In ratio to total
national production, Federal outlays for all domestic programs declined
from 8.17 percent in fiscal 1947 to an estimated 5,71 percent for fiscal
1967. Measured against a growing population, outlays for all domestic
programs in the Federal Budget on a per capita basis declined from
$230.91 in fiscal 1947 to an estimated $198.04 for fiscal 1967.
Proposed pfiotity programs m the Federal Budget
To help implement the great priorides of our national needs,
described above in some detail, and with full allowance for private and
State and local action, a Federal Budget is incorporated in the
"Freedom Budget."
This Federal Budget is reconciled with all major goals for employ-
ment, production, and incomes in the "Freedom Budget." *
The "Freedom Budget" makes no attempt at independent judgment
as to our national requirements in the category of national defense, space
technology, and all international. But in order to make clear how much
room there is for fulfillment of the great priorities of our domestic needs^
'* See chart on page 78.
65
It adopts in this category what might be called the composite judgment of
mfonned experts. In 1964 dollars, total Federal Budget outlays in this
category would rise from 64,560 billion dollars in fiscal 1967 to 87 500
billjon m calendar 1975, but would decline from 934 percent to 7 81-8 06
percent of total national production (GNPJ in a properly expanding US
economy. If these estimates should turn out to be too high, there would
be just that much more room for domestic programs.*
For all domestic programs, starting with the actual for fiscal 1967
and projecting goals for calendar 1970 and 1975, Federal Budget outlays
should rise from 39.485 billion dollars to 57.500 billion and then to
67.500 billion; on a per capita basis, they should rise from $198.04 to
$275.12 and then to $298.67; as a percentage of GNP, they should rise
trom 5.71 to 6.55-6.61, and then decline to 6,03-6.22.
For the Economic Opportunity program, progress on other fronts in
the years ahead would perhaps reduce the need for this program to less
than It would otherwise be. Nonetheless, total Federal Budget outlays
for this program .should rise from 1.474 billion dollars in 1967 to 3 000
billion m 1970 and then to 4,000 billion in 1975; on a per capita basis,
from $7.39 to $14.36 and then to $17.70; and as a percemage of GNP
from 0.21 to 0.34 and then to 0.36-0.38.
For housing and community development, total Federal Budget out-
lays should rise from 0.114 to 3.350 and then to 3.800 billion- on a
per capita basis, from $0.57 to $16.03 and then to $16.81- and as a
percentage of GNP from 0.02 to 0.38, and dien decline to 0.34^0,35.
For agriculture and namral resources combined, total Federal Budget
oudays should rise from 5.932 to 10.500 and then to 12.000 biUion- on a
per capita basis, from $29.75 to $50.24 and then to $53.10- and as a
percentage of GNP from 0.86 to 1.20-L21, and then decline to 1.07-1. IL
For education, total Federal Budget oudays should rise from 2 612
to 7 000 and then to 9.500 biUion; on a per capita basis from $13.10 to
m49 and then to $42.04; and as a percentage of GNP from 0.38 to
0,80 and then to 0.85-0.88.
For health semces and research, total Federal Budget outlays should
nse from 3338 to 4.800 and then to 7.000 billion; on a per capita basis,
nnJ.f'^^ Budget portrayals are in 1964 dollars for consistency throughout All
Budget goals would need to -be lifted about 6.6 percent to adjust them to Z 1966
pnce level, and hfted further if prices rise 1966-1975. The ^a^erfof 1970 ^d
1975 are based on the higher and lower projections for GNP. i^^u and
66
from $16.74 to $22.97 and then to $30.97; and as a percentage of GNP
from 0.48 to 0.55 and then to 0.62-0.65.
For pubhc assistance, and labor, manpower, imd other welfare
services, total Federal Budget outlays should rise from 4.371 to 6.600
and then to 7.500 billion; on a per capita basis from $21.92 to S3 1.58
and then to $33,1S; and as a percentage of GNP from 0.63 lo 0.76, and
then declme to 0.67-0.69.
In order to help provide needed expansion of benefits to the aged
under the OASDHI program, without excessive reliance upon regressive
payroll taxes, Federal Budget contributions to this program (financed by
progressive taxation) should be promptly instituted. These contributions
should be at least one billion dollars by 1970, and at least two billion
by 1975.*
Reasonableness of the Federal Budget projections
There are various ways of measuring the reasonableness of these
Federal Budget projections, and indicating that they would neither distort
the traditional balance between . Federal actions and other public and
private actions at all levels, nor impose an excessive strain upon the
economy or the Federal Budget.
First, the Federal Budget in calendar 1970 would be only 15.38-15.51
percent of projected total national production, and in calendar 1975
only 13.84-14.29 percent. This contrasts with an average of 16.16 per-
cent for the fiscal years 1954-1967 (1967 estimated).
Second, looking at the economy as a whole, including nonFederal
public outlays, projected public outlays for goods and services at all
levels would be 20.4-20.6 percent of GNP in 1970 and 19.6-20.3 percent
in 1975, compared with 19.8 percent in 1965. Private consumer oudays
would be 63,2-63.3 percent of GNP in 1970 and 63.3-63.5 percent m
1975, compared with 63.7 percent in 1965. And gross private domestic
investment would be 16.2-16,3 percent of GNP in 1970 and 16.4-16,9
percent in 1975, compared with 16.5 percent in 1965. These portrayals
are for calendar years.**
Third, the total Federal Budget, which stood at 104 billion dollars
in fiscal 1967 (all measurements in 1964 dollars), would rise to 135 billion
in calendar 1970, and 155 billion m calendar 1975, Thus, the Federal
* See chart on page 80.
** See chart on page 81.
67
Budget in 1975 would be about 56 billion dollars higher than in calendar
1965, For the decade as a whole. Federal outlays would aggregate about
355 billion dollars more than if the Federal Budget remained stationary at
the 1965 level. This appears to be a quite moderate allocation to all
programs served by the Federal Budget, as it would be only about one
seventh (and the increases in domestic programs as urged in the "Freedom
Budget*' would be only about one-thirteenth) of the 2,315-2,442 billion
dollars by which our total national production in 1966-1975 should be
in excess of projection ahead at the 1965 level (this excess being the
"economic growth dividend").
Fourth, total Government purchases of goods and services at all
levels would rise from 131 billion dollars in 1965 to 220 billion in 1975,
or about 90 billion. For the decade as a whole, these outlays would
aggregate about 506 billion dollars more than if they remained at the
1965 level. This also seems moderate, coming to not much more than
one-fifth of the **economic growth dividend."
Fifth, these projections strike a fair balance between Federal and
State and local responsibilities. While total Federal purchases of goods
and services would rise from 64.6 billion dollars in 1965 to 85 billion in
1970 and 100 billion in 1975, State and local would rise from 66.4 billion
to 94.0 "billion and then to 120.0 billion.
Sixth, from 1962 through 1965, Federal tax reductions and conces-
sions had an annual value in the aggregate of close to 20 billion dollars
when fully effective. In the decade ahead, this surrender of Federal
revenues would aggregate about 200 billion dollars, without allowing for
the fact that a growing economy increases the annual value of given rate
reductions in taxes. This allowance might well increase the aggregate
cost of these already-enacted tax cuts to 300 billion in the decade ahead.
Having committed the Federal Budget to this amount of tax reduction, we
can certainly afford to increase Budget outlays by somewhat more than
this — about 355 billion dollars — in the aggregate in the decade ahead.
For every dollar of such increased outlays, unlike a dollar of tax reduction,
can be pointed directly toward what the nation and the people need most.
Tax implications of the proposed Federal Budget
It is reliably estimated that the increased tax revenues accruing each
year to the Federal Government from economic growth at existing tax
rates may lift Federal tax collections (Conventional Budget concept) by
about 8-10 billion dollars a year on the average during the next ten years.
For the decade as a whole, about 400-550 biUion dollars more would be
68
"It Sure Seems To Be Coming, But I Don't Think
It's Going To Help Us"
Herblock in The Wctahington Po$t
collected in Federal taxes than if tax collections remained stationary at
the 1965 level — i.e., if the U,S. economy did not grow. This 400-550 bil-
lion dollars in increased tax collections would be tremendously in excess-
of the estimated 355 billion dollars representing aggregate increased Fed-
eral outlays over the decade. This huge diflference could be devoted in
part to properly-placed tax reductions, or to help States and localities
which are much harder pressed in financial terms than the Federal
Government.
Allowance for excessive optimism in the estimates
It may be argued that the projections for U.S. economic growth are
too high, and that -therefore there would be less room than has been
estimated for utilizing the Federal Budget along the lines indicated above.
The first answer to this argument is contained in the demonstration just
above, showing the vast margin between estimated increased Federal
outlays and estimated increased Federal tax collections at existing tax
rates. The second and far more important argument is that the very
meaning of priorities is that they should receive first call upon our
resources; and there is plenty of room in the national economy — if neces-
sary — to use some properly devised tax increases to cut back on what we
need least in order to take care of what we need most. This point is
elaborated further in the following discussion of the inflationary problem.
70
Xm, The Moral Aspects Of
The Problem Of Inflation
The nature of the resistance in some quarters to the "Freedom
Budget" is not unpredictable. Its goals will be accepted as worthy, but
will be held undesirable in part on the ground that they would be "infla-
tionary." It is none too early to provide objective answers to any such
doubts about the "Freedom Budget."
A balanced view of the inflationary danger
The desirable purpose of ^avoiding price increases, and especially
those affecting the cost of living, has undoubtedly led to gross exaggeration
of inflationary dangers in the U.S. economy. From 1929 through 1965,
the average annual increase in consumer prices was about 1.8 percent, in
wholesale prices about 2.2 percent, and in industrial prices about 2.1 per-
cent. This has not been a high rate of price advance, when compared
eidier with earlier periods in American history or with experience overseas.
Moreover, the bulk of these price increases occurred during the
World War 11 and reconversion eras, and during 1950-1951 withm the
Korean war era when the Chinese intervention led to very drastic and
sudden changes in expectancies and to a good deal of scare-buying. These
two inflationary movements could have been checked much more efifec-
lively by higher taxes during World War II and less precipitate abandon-
ment of controls immediately thereafter, and by more prompt imposition
of controls during the Korean war. Be that as it may, nobody said in
those times that the need to curb inflation should cause us to cut back
on what we needed most. Instead, we accelerated what we needed most,
and cut back on what we needed least.
Aside from these two wartime eras, which were economically dis-
similar to anything now confronting us, the period from 1929 through 1965
netted virtual stability of consumer, wholesale, and industrial prices.
In addition, experience during the past decade has tended to discredit
the classical dogma that there is a necessary and unavoidable direct
correlation between the rate of economic growth and how close we are
to full employment on the one hand, and price inflation on the other hand.
Price inflation was severe on the average during the period 1955-1958,
within which we experienced a substantial economic recession, netted prac-
71
]
tically no economic growth, and witnessed very large increases in unem-
ployment. In contrast, the years 1960-1965, when we accelerated greatly
the rate of economic growth, and reduced substantially the amount of
unemployment, registered an average annual increase of only 1.3 percent
in consumer prices, 0.3 percent in wholesale prices, and 0.2 percent in
industrial prices.
It is true that price increases were considerably larger than this
during 1965-1966. But these did not justify reversion to the classical
dogma that periods of stagnation and unemployment in the long-nin net
less price inflation than periods of optimum economic growth and full
employment (short of the extraordinary pressures of a full-scale war, or
very drastic changes in expectancies, such as during 1950-1951).
Nor have those economists and others who repeat again and again
that a moderate amount of price inflation is inequitable, and hurts those
most who need help most, attempted any convincing documentation of
their thesis. A moderate long-range upward movement of prices is not
in itself beneficial. But it may well be argued from U.S. experience that
the economic conditions and public programs during such periods have
yielded more equity and more improvements in income distribution than
those periods where stable prices have been accompanied by neglect of
the needs of the nation and the people. Aside from falling farm prices,
the period 1922-1929 was characterized by a remarkably stable price
level. But sins of commission and omission on public and private fronts
steadily worsened income distribution, hurt those who needed help most,
and ultimately brought on the Great Depression* The stock market crash
was only the spark.
However, it is not the purpose here to get involved in debate as to
the relative merits of a stable and moderately rising price level. The
"Freedom Budget" is willing to assume that a virtually stable price level
may be desirable, and that "inflation," even in small doses, is undes-irable.
The real economic problem is how we combat inflation or the threat of
inflation, and this is at bottom a moral or social question.
The moral or social question
Insofar as inflationary pressures result from attempting to do more
than our resources will permit at their current state of development, we
must obviously cut back on some things. But what should we cut back on?
If the increased expenditures for the Vietnam war in themselves
were to place excessive pressure upon our productive resources (which
72
seems unlikely, in that these increases amount to much less than the
current economic slack), it would not be the national policy to avoid
these increased defense outlays. Instead, through higher taxes, we would
cut back on something else. This would amount to saying that the
increased defense outlays were a top national priority.
But for reasons stated at the very outset, this is not our only high
national priority, and we would come a cropper if we acted as if it were.
The other great national priorities set forth in the *'Freedom Budget" are
also highly important, and far more important than scores of billions of
dollars of current consumption for some purposes, and the investment
and production facilities utilized to serve such consumption. To reject this
thesis in whole or in part, in the actual evolution of our national economic
policies, would be deciding that the goals of a Great Society should bear
the costs of a limited war, while others feed on the even greater "pros-
perity" which the stimulus of additional war-spending provides.
Expressed differently, while those concerned with the prevention of
inflation insist that they want to prevent its cruel ravages upon the least
protected and least fortunate, the just-cited ' method of combatting infla-
tion would do just the reverse.
Even before 'the new situation in Vietnam, some of our nation^
economic policies afford vivid examples of how an avowed campaign
against inflation has redistributed uicome in the wrong direction, hurt
those who need help most, and helped those most who need help not
at all. It has been estimated that, from 1953 through 1965, the policy
of tight money and rising interest rates has transferred about 75 billion
doUais on net balance. Most of these transfers have been toward those
who did not need this income supplementation. Most of these transfers
have been away from those paying the higher rates of interest: the home-
owner in the lower half of the income structure, including the poor; the
worker buying a second-hand car on lime to drive to his place of employ-
ment; the family buying a television set on time, so that those among its
breadwinners who are not employed may have something to watch; the
family borrowing to finance an illness of long duration or to send a child
to coOege; the small businessman and the farmer who are far more
dependent upon credit than the industrial giants whose over-investment
programs are not curtailed by tight money or rising interest rates. Even
now, the Federal Government is paying out more than 4 billion dollars
more in interest payments than if the interest rates of 1952 had been
maintained, and this alone comes to about 2^^ times the fiscal 1967
Federal Budget item for the Office of Economic Opportunity. The same/
73
rising-interest-rates policy has done even more damage to States and
localities endeavoring to perform essential public service.
These excess interest payments during the thirteen-year period 1953-
1965 inclusive have involved annual income transfers of about 5¥^ billion
dollars a year. Such income transfers, used in different ways through
different programs, could have increased for each of these thirteen years
by more than $750 the incomes of all of the families in the U.S. with
annual incomes under $3,000, or increased by more than $3,750 in each
of these years the incomes of all the families in the U,S. with incomes of
under $1,000,
Hie technical experts may continue to argue whether this monetary
policy has helped or hurt the performance of the economy as a whole,
with some of them takmg the latter view. But we certainly could devise
methods to control inflation, more selective in nature, which would
accomplish better economic results and not fly in the face of all our social
and human purposes.
While the monetary polices have been used to fi^t inflation, tax cuts
having an aggregate annual value of close to 20 biflion dollars were
imdertaken from 1962 through 1965 for the opposite purpose of stimulat-
ing the economy. There are diflFerences of vievipoint as to whether this
was the mos.t effective way of providing economic stimulation, By 1966,
there emerged a growmg recognition that the investment boom in plant
and equipment had become excessive and was the main danger of an
inflationary nature. But regardless of this, a large part of the increased
output and job opportunities resulting from the tax cuts served national
purposes of far lower priority than thos"e which would have been served
by a different balance between tax cuts and increased Federal spending,
and this new balance is required in future.
Taking together the interest-payment transfers having an average
annual value of about 5^ billion dollars, and the tax cuts to stimulate
investment having an annual value of not far from 9 billion, the total comes
to about 14^ billion. This is more than the amount of income needed
to lift all of the 34 million poor in the U.S. above the poverty-income
ceiling. Even allowing for some differences in interpretation, this leaves
no room for the argument that we cannot afford what we need most.
Under any circumstances, it would be a monstrous distortion of our
values as a nation and a people to argue that we should balance the
desirability of reducing unemployment (and meeting the other priorities
of our national needs) against the prospects of some increases in the price
74
level. Nothing could be more unjust than to ask unemployed breadwin-
ners or the irii<abitants of the slum ghettos to bear the cost of assuring
the aflluent against some increases in the prices they pay for a third car
in die garage, or another fur coat, or even a few more steak dinners per
week. If the pressures upon our productive resources become more
severe, or even in the face of the current selected inflation, we should
indeed take action — but act with fairness and regard for values.
We may be able to carry forward the great priorities of the "Freedom
Budget" without tax increases, or without substantial tax increases, in view
of our reserve productive powers and the great increases in our pro-
duction potential from year to year. But if not, we should increase taxes
by whatever amount may be necessary to impose the burden where it can
easily be borne, instead of fastening it around the necks of the downtrod-
den. A very substantial increase in taxes could be effectuated merely by
repealing recent tax cuts of very low priority, such as the amortization con-
cessions, a portion of the corporate tax cuts, and some of the tax cuts on
high- and upper-middle incomes. We should under no circumstances con-
sider an across-'the-board tax increase of a flxed percentage applicable at
all income levels, for this would make even more regressive a tax structure
which has become far too regressive already.
The deviations to date from appropriate economic and social policies,
and any threat of further deviations in the future, do not result from ill-
will. They result because we have not yet made an adequate budget of
our needs and resources, identified priorities accordingly, and adjusted
policies and programs to meet these goals.
All this the "Freedom Budget" would enable us to do. It would
reconfirm our power to act, improve our sense of direction, and fortify
our sense of justice. It would rally to the support of its objectives the
American people, and their leaders in every walk of life. It would combine
economic progress with moral purpose. And that is the true role of our
great democracy in a troubled world.
The six followmg charts complete the presentation.
75
HOW MUCH WE HAVE TO WORK WITH,I965-|975
BASED ON ECONOMIC GROWTH PROJECTIONS
T<)tal National Production (GNP) in Billions of 1964 Dollars
Higher PrajftCtton
LowQt Proiectlon
2.442.4
GNP
1975
Excess of
1975 GNP
Over
1965 GNP
Excess of Excess of
Averoge Annual Aggregate
GNP.1966'1975, GNP, 1966-1975.
Over 1965 GNP Over Aggregate
if 1965 GNP
Persisled,
1966-1975
76
I
NUMBER IN U.S. LIVING IN POVERTY,
DEPRIVATION. COMFORT. AND AFFLUENCE.
1964. AND GOALS FOR 1970 AND 1975
Annual Money Incomes, Before Taxes Jn 1964 Dollars
! FAMILIES INF
JAwCfl
T\l
. ^^^H
''UVtn 1 1
■
/n MiUsons ^ ^
L.J '964.
Actual
m
■ 1970,
Goal
i/^JUUr&.
m\
■ 1975.
Goal
9.1
4.5
Iff", r'-'i
--y=-'-
;;::H;-i
0.2
OJL
0,7 0.5
Under $2,000
Under $3,130^
POVEFTTY
FAMILIES IN DEPRIVATION,
COMFORT.AND AFFLUENCE
i3,l30- $5,000- $7,000 a
4^99 6,999 over
DEPRIVATION- COMFORT a
DEPRIVATION COMFORT AFFLUENCE
UNATTACHED INDIVIDUALS
IN POVERTY
in Milfions
IS64, Actual
1970. Gool
1975. Goal
S.I
ha
1±. 0.7
Under $1,000 Under $1,540^
POVERTY
UNATTACHED INDIVIDUALS IN
DEPRIVATION.COHFORT.aAFFLUENCE
In Mfffions
4.0
5.0
7.0
a.a 2.7
1
3.2
4.3
$1,540- $2,500- $5,000 a
2,499 4,999 over
COMFORT a
DEPRIVATION COMFORT AFFLUENCE
-^ The overage sizg of fomilles living In poverty is 3.19. so ^.1 million families involve about
29.0 million people.
^ The overage siie of families living in deprivation is about 3.5 .
-^ the figures of $3,130 and $1,540 are the most recent estimates of the Office of Economic
Opportunity with respect to the poverty- Income colling ,
0atdH9^4:0ffice of Economic Opportunity and Bureau of the Cen3U5LpTOJec1ions,"Freedom Budget".
77
1
THE "FREEDOM BUDGET." 1970 AND 1975 GOALS
EMPLOYMENT, PRODUCTtON.AND SPENDING
PROJECTED FROM LEVELS IN 1965
p Single Projflction-^
EMPLOYMENT
(InMiillonsof Mon-YMfSl
Up
I&6
Up
9.3
1970
1975
CONSUMER SPENDING
1970 1975
Dollar Items in Billions of 1964 Dollars
Higher ProjecfJon
TRUE UNEMPLOYMENT
HnMllllona of Mon-Yeors)
1970
1975
Down
2,1
Down
I, a
FULL-TIME REPORTED
UNEMPLOYMENT
1970 1975
Down
l.l
Down
0.9
GROSS PRIVATE
INVESTMENT
(Irc.Met Foreian)
U0
t7a8
Up
$33.8
RESIDENTIAL
STRUCTURES
Up
Up $36.2
ig0.g
j$r9.2j
1970
1975
Lower Projection
TOTAL PRODUCTION
Up
$4S7.3
1970
1975
PUBLIC OUTLAYS FOR
GOODS AND SERVICES
ICalendar^ars]
FEDERAL
Up
420.4
Up
$35.4
1970
1975
STATE AND LOCAL
Up
$53.6
Up
$27.G
1970
1975
-^The EinQle prajecttofts reloe? to goalt of such high priarity thol they should not bo reduced ewen if onty
Ihft lower gools for GHP are olMined. In fhol event.iawer priorJIy obiecilvea shoyjd bfl m«Jlfiad accordingly.
78
THE "FREEDOM BUDGET'! 1970 AND 1975 GOALS
FOR GAINS IN INCOMES
PROJECTED FROM LEVELS IN 1965
Singie Projection-'^
Billions of i964 Dollars
I Higher Projection
Lowsr ProJBction
WAGES AND SALARIES
Up
$242.0
Up
1970
1975
TRANSFER PAYMENTS
1970 1975
NET FARM INCOME
1970
1975
BUSINESS AND
PROFESSIONAL INCOME
1970
1975
-^Thesingla projecllon reforesto o g-jolof such high priority that i1 should not be raducad even if only the lower
^ols far overol I grawth orft otlajned. In thai ovsnt, lowv pTlorily ob|ectlvM should be modified occ&rdingly.
79
ROLE OF THE FEDERAL BUDGET
IN THE "FREEDOM BUDGET"
I9G7 Actual, Fiscal Year; 1970 ond 1975 Goals, Calendar Years;
All Figures in 1964 Dollars
ALL FEDERAL OUTLAYS
NATIONAL DEFENSE,
ALL DOMESTIC
^V^
SPACE TECHNOLOGY, ft
PROGRAMS
^z\
ALL INTERNATIONAL
sai'W
yi^
X'^^tA
^ji'j'
L* I*"
m( ^
^
'i^"ti"'\
sC^Jt :d
Vi^ 1
^^>
y
tii'^
^ ^
^
cS^^i
i
3
Toroi
Pftr
Tola)
Far
Total
Per
Enperid.
Capito
%of
Eipervd,
Capita
*of
E«p«nd.
Capita
%of
Vadr <BiL $)
(SI
CNp2/
Year (Bfl $]
($)
Gtip2/
v^r can. $)
f$)
GNpay
1967-!/ 104.045
52IJ9
15.05
1967V €4,560
323,77
9.34
my^ 39.485
198.04
571
1970 ISROOO
645l93
1538
I5.SI
1970 77500
370.82
8.B3
e.90
E970 57500
275. IZ
6.55
6.61
1975 155.000
685.B4
13.84
14.29
1975 37.500
38717
7.81
8:06
1975 67500
298.67
6.03
6 22
ECONOMtC OPPORTUNITY
HOUSING AND
AGRICULTURE; AND
PROGRAM
COMMUNITY
NATURAL RESOURCES
DEVELOPMENT
^1
1!
®
^a
Totol
par
Tolul
Per
Total
Per
Exp&nd,
Capita
%9l
ExtMind.
Capita
%of
E^tpena
Cadra
%ot
year tBil.$)
1$l
OHPSy
■itor (Bll, $)
(S^
GNp£/
■r«ar (&I. $1
(ii
GNP£/
ISGTJ' 1.474
739
0,21
1967-1/ 0.114
0.57
0.02
1967-^ 5.932
29.75
0.06
1970 3.000
14.36
0.34
0.34
1970 3.350
16,03
0.38
0.38
1970 10.500
50.24
1.20
1.21
1975 4.000
1770
0.38
0.37
1975 3.800
18.81
0.35
0.35
1976 12.000
53.10
1.07
III
EDUCATION
HEALTH SERVICES
PUBLIC ASSISTANCE;
AND RESEARCH
LABOR, MANPOWER.
4ND
lISIc
OTHER WELFARE SERVICES
tf-SS
S&.
^^
m
m
Total
P«r
Totol
Per
TolQl
Par
EKp«nd,
Co pita
It or
Eiipflnd,
Caplto
^'''n
Exfiend.
CoplTd
*o^
Year (Bil, $)
(5)
GNP£/
Vaar <eil $)
($}
GNPE/
Y«ar m.$)
($}
Gt^pE/
1967^ 2,612
13.10
0.38
1967-^ 3.338
16.74
0.48
1967^ 4.371
21.92
0.63
1970 7.000
33.49
0.80
o.eo
1970 4.800
22.97
0.55
0.55
1970 6,600
31.58
0.76
0.76
1975 9.500
4204
0.85
1975 7000
30.97
0.62
1975 7,500
33,18
0.67
0.88
0.55
0.69
-l^AdmlnatrotBn^ ProooMd Budoel m of Jon 23, 196$. adjuslod to 1964 daltorfl.
2^1970 and 1975 ralloa to GNP on banio of hiflhar ond lower GNP projactlors. .
Note Total Proposad BudgiQl also Includes c Federol contribution of on« billion dollars In 1970, end two bItRon In 1975, 1o
tiM OASDHI to fteipJncreoM tj anollt poymants to ttia aged.
80
THE "FREEDOM BUDGET" MAINTAINS BALANCE
OF PUBLIC AND PRIVATE RESPONSIBILITIES
COMPOMENTS OF GNP
Billions of 1964 Dollors
120.0 '"Totol GNP
■ Private Consumer
1 Outlays
Gross Private
Domeslic Investment
(including mt foreign).
Public Oiitlaya
a1 oil levels for
goods ond services-^
1965 Lower Higher
Actual 1970
Goal
Lower Higher
1975
Goal
1000%
PERCENTAGE RELATIONSHIPS
IOQ.0% 100.0% 1000% 100.0% - Total GNP
1965 Lower Higher
Actual 1970
Goal
Private Consumer
Outlays
Gross Private
■Domestic Investment
.Juil'l
(including net foreign)
M Public Outlays t " V
I -at all levels for \^
^:
goods ond services
Lower Higher
*975
Gool
■^Public oullayi ara ot such high priority thai th*y an proiacttd Idtniic^Hy for t]ie lower and
NghfT <iNP oooIb, wltK modltlcatloni of otlier gooli accordingly.
SI
Technical Note
The economic and financial projections in the "Freedom Budget" are
based upon a ^^model" for a oomprehensive U.S. economic budget or
balance sheet of our resources and needs. All of the components are
reconciled on both the product and income side. As projections of this
type mvolve a quantitative balance sheet which reconciles aU items it is
hardly possible to embody in the "Freedom Budget" what might be caUed
average projections, including those of several competent organizations
mterested m this problem. Nonetheless, the projections for overall
economic growth in the "Freedom Budget," and correspondingly for some
components thereof, are set forth within a band or range which takes
account of some of these competent projections.
nr./7 ^fr^^'* ^^ "^'"''^''^ ^^^^''" P^^j^^*^ ^ 1^75 gross national
product within a range of from 1,085 billion dollars to 1,120 billion dol-
ors, measured m 1964 doUars. A study entitled The Dollar Costs of
ZfZT^f G«^^^ prepared by Leonard A. Lecht and published by the
National Planning Association in May 1965, projects for 1975 a gross
naional product of 981 billion dollars, which would be about 1010
bilhon when converted into 1964 dollars. The Conference on Economic
Progress m its studies directed by Leon H. Keyserling, projects a 1975
gross national product of 1,120 bilhon dollars in 1964 doUars A pioneer
and widely-accepted study in 1958 projected an opthnum gross national
which would be 1,173 billion when converted into 1964 doUars. '
The varying estimates of our gross national product potential by 1975
result primarily from varymg estimates as to the feasible growth in produc-
tivity or output per man-hour in the private sector. Some competent
estmiates on this score have ranged from 3.0 percent to 3.8 percenf The
Freedom Budget" utihzes estimates within a band rangmg from about
1^07^0^^""' '"^ P-ent consistent with estimated lotal natioS
The probabilities are that any one of the various projections is "vahd "
dependmg upon the relative weight attached to the iost o Lcleasti
andT ^^^P^l^^^^ff-^^' --^--<^ -gainst the benefits to be aTeve^
82
While the "Freedom Budget** projects the 1975 gross national
product withm the ranges set for(h abiivc, it does not correspondingly
use ranges in quantifying the great domestic priority objectives. To do
so would overcomplicate the entire presentation. Much more important,
the "Freedom Budget" is based upon (he proposition that the same great
domestic priority objective should be sought whichever of the two gross
national product targets is chosen, which would mean simply that the
choice of the lower GNP target (in contrast with the higher GNP target)
would require a slightly lower rate of growth in relatively less essential
areas of endeavor in order to leave room for the great domestic priority
targets. The U.S. economy is now so productive, and its potential for
further gains is so immense, that wc can afford, and cannot afford to
neglect, these great domestic priority targets, whether the GNP by 1975
grows to 1,085 billion dollars or 1,120 billion, or even only to 1,000
billion.
Indicative of the reasonableness of the great domestic priority targets
set forth in the "Freedom Budget," is a comparison of their magnitudes
with estimates based on a detailed study prepared by Gerhard Colm and
Peter Wagner of the National Planning Associadon and published by the
Brookings Institution. In the following table, column (a) represents
the Federal Budget goals of the "Freedom Budget" for 1975. Column (b)
presents estimates based on the NPA-Brookings study. Before the two
columns can be compared, it must be noted that the "Freedom Budget"
(column a) is stated in 1964 dollars and in terms of the Conventional
Federal Budget, while the NPA projections (colunm b) are stated in terms
of current dollars, assuming an annual price rise of 1.5 percent, and in
terms of the Federal Cash Budget. Colunm (c) presents the Cohn-
Wagner projections adjusted to achieve comparability with the "Freedom
Budget"; that is, they are expressed in 1964 dollars and in terms of the
Conventional Federal Budget. This reduces the total from 7L3 billion
dollars to 51.5 billion. Actually, the Colm-^Wagner projections for 1975
are extrapolations of their estmiates for fiscal year 1973. They are the
highest of four alternative projections, and are made under the assumption
that there will be substantial reduction in arms outlays. With the excep-
tion of an alternative of the Colm-Wagner projections which excludes
adoption of any new programs, the projected totals based on the odier three
alternatives would range between 41.0 billion dollars and the 51,5 billion
shown in the table. Thus, tht 45.8 billion dollars total in the 'Treedom
Budget" for 1975 falls about midway between die lower Colm-Wagner
projection of 41.0 billion and the higher Colm-Wagner projection of
51.5 billion.
83
Housing and community development
Health services and research
Public welfare; labor and manpower
Contribution to OASDHI
Economic Opportunity
Education and research
Agriculture; natural resources
(in billions of dollars)
(a) (b)
(c)
3.8 9.5
6.2
7.0 9.5
7.S
7.5 19.3
10.4
2.0 —
—
4.0 7.0
5.7
9.5 16.3
13.8
12.0 9.7
7.6
45.8 71.3 51.5
Furthermore, the differences between colmnns (a) and (c) are
probably even less than appear. With, respect to housing and community
development, for example, it may well be that the difference between the
3.8 billion dollar figure in column (a) -and 6.2 billion dollar figure in
column (c) is much greater than the difference in the respective programs
contemplated, and is to be explained by different methods of financiag
of the Federal contributions in aid of projects.
It therefore appears that the variations lq detail in various competent
studies do not substantially affect the validity of the "Freedom Budget,"
when properly interpreted as a broad expression of our economic capabili-
ties and the goals we should seek.
84
85 316